UK Government to Ban Personal Injury Referral Fees

September 9, 2011

The UK government has come down on the side of the country’s insurance industry with its announcement from Justice Minister Jonathan Djanogly that it will ban referral fees in England and Wales.

The charges are assessed when information concerning personal injuries is transferred, in most cases to lawyers, who then file claims and personal injury actions.

The measure is backed by the Association of British Insurers and a number of large UK companies, who have argued that the fees encourage litigation, which drives up costs, and ultimately results in higher premiums for UK motorists.

The ABI issued a statement, supporting the government’s decision. Its Director General Otto Thoresen stated: “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.

‘It is important that the ban must be watertight and apply across the board. Banning referral fees is an important first step in tackling our dysfunctional compensation system, and needs to be accompanied by a reduction in legal costs and action to tackle whiplash if honest customers are to benefit from these reforms.’

There are still a number of questions as to how far legislative reforms will go in implementing the ABI’s concerns, as a number of groups oppose the changes.

However, what the ABI describes as the “compensation culture,” has no doubt encouraged the filing of personal injury claim. As a result there are more lawsuits and more settlements and verdicts. The costs connected with this expansion have doubled over the last 10 years. In 2010 total costs were over £14 billion [$22.33 billion]. On average insurance premiums have risen by 30 percent in the UK over the same period.

Sources: Association of British Insurers and news reports

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