The government has said that it will ban the system of insurers receiving referral fees from solicitors for passing on clients’ details after they have been involved in a car accident.

This has been brought about by the recent rise of up to 40% in car insurance costs as more and more people make claims for personal injuries.

Justice Minister, Jonathan Djanogly, said that the ordinary driver was seeing huge hikes in their premiums due to the ever increasing number of injury compensation claims.

"Many of the claims are spurious and only happen because the current system allows too many people to profit from minor accidents and incidents. Referral fees are one symptom of the compensation culture problem and too much money sloshing through the system. People are being encouraged to sue, at no risk to themselves, leaving schools, business and individuals living in fear of being dragged to the courts for simply going about daily life". Said Mr Djanogly.

ABI’s director general’ Otto Thoresen, said: “We are very pleased that the government has listened to the insurance industry’s campaign for a ban on referral fees. They add no value and encourage spurious and exaggerated personal injury claims.

So the thinking is that if the conduit between the insurer and the solicitor can be severed then the number of injury claims will drop, followed therefore by a reduction in premiums.

There may well be a problem with a ‘compensation culture’. But does that make every injury claim ‘spurious’? Obviously not. For the just cases a referral fee could lead to the injured party getting the right result.

If a claim is brought and a payment made then surely the claim was legitimate? What the current system may be telling us is that car accidents are a lot more costly all round than a bit of damaged car body work, which is what the insurance companies would like to limit pay outs on. Why should the injured victim of a car collision have to bear any cost at the end of the day, or be unable to bring a claim because they are too poor?

The referral fee system is putting the injured party in touch with an expert who can get them what is rightfully theirs. Without it people may lose out wrongfully. Banning referral fees is tantamount to reducing peoples’ access to justice.

If there is a fault it lies with what happens after the claim is brought, not in how it is brought. If this was dealt with then referral fees would not be an issue. If contrived cases get through the courts then that is a matter for the courts and referral fees do not change that.

Remember also that referral fees coming into the insurance company should help reduce premiums.

If we do ban these fees then while we’re at it we may as well not allow people to be referred to human rights lawyers, that’ll reduce costs and embarrassment for the government.

Remember that the Justice Minister did say that referral fees were a ‘symptom’ of the compensation culture, not a cause of it. Since when has treating a symptom done anything other than hide the true causes of a problem?

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