UK’s Legal Expense Insurers Say Referral Fees Cause for Claims Increase

June 30, 2011

The UK’s Legal Expenses Insurance Group (LEIG) has taken issue with claims that the rise in lawsuits over automobile accidents are responsible for the car insurance rate rises.

The Group, which was formed in April 2006 by a number of leading legal expenses insurers, said it could provide “concrete evidence that motor insurers are lining their own pockets;” adding that LEIG has “welcomed Labour MP Jack Straw’s investigation into so-called referral fees.”

Paul Hurley, speaking on behalf of the Group, stated: “Over the past few years ‘After The Event’ insurance providers, among others, have been castigated by motor insurers for fuelling costs, leading to increased motor insurance premiums. Those same insurers accept a referral fee for personal injury claims arising from their clients through own third party capture system, a system where there is clearly a conflict of interest.”

The UK government is currently considering making “major changes to access to justice,” the LEIG bulletin noted. Hurley added: “The government has been hoodwinked by the ABI [Association of british Insurers] and motor insurers’ claims that the increase in motor insurance premiums is mainly down to others – but we now know the real position is that motor insurers have well and truly had their hands in the till!”

The proposed changes are based on “The Jackson Report,” which is part of the the Legal Aid, Sentencing and Punishment of Offenders Bill. In a strongly worded statement Hurley indicated that “Lord Justice Jackson should have considered more closely what really does provide access to justice and what doesn’t.

“We believe that substantial cost reductions can be achieved without throwing the baby out with the bath water and denying any one other than the super rich, real access to the Courts. This is unfortunately the route the government is taking at this stage. We call upon the government to think again about making wholesale changes to access to justice, which, should the bill be passed, will deny access to justice to personal injury claimants in England and Wales.”

Source: Expenses Insurance Group

IJ Ed. Note: At least one UK auto insurer, AXA UK, has stated that it will no longer accept referral fees from lawyers.

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