The government prohibited all referral fees for personal injury claims within the past decade. This decision arose to combat an increase in insurance companies selling personal injury details, thus raising insurance costs.
What Is a Referral Fee?
A referral fee is a payment paid to an individual or entity in exchange for new business, typically in the form of a potential client.
Though associated with commercial relationships, recently, referral fees have become prevalent in legal scenarios. Specifically, injury claim referral fees between insurance companies seem to correlate with higher costs like insurance premium increases.
What Is a Personal Injury Claim?
A personal injury claim is a legal case you pursue when you sustain physical or emotional injuries from an accident that was someone else’s fault. When you file an official claim, you follow the formal process to obtain compensation from the other individual or entity responsible for your injury. This compensation comes from the other party’s insurance company.
Here are examples of what scenarios could qualify for a personal injury claim:
- Road traffic accidents
- Accidents in public
- Accidents at work
- Serious injuries
- Housing disrepair
- Criminal injuries
Referral Fees and Personal Injury Cases
Since April 2013, paying or receiving fees in personal injury cases has been a regulatory offence in England. This ban means you nor anyone else can accept or give a payment in exchange for details about a client to a third party offering legal services for personal injury damages.
This change related to accident claim referral fees comes from the Legal Aid, Sentencing, and Punishment of Offenders Act 2012. Stipulations in this act apply to insurance and management companies alongside solicitors, barristers, and legal executives.
This act helps clients know when lawyers or third parties use referral fees for personal injury claims and where that money is going.
The ban is active for those in England and Wales. For citizens in Scotland, injury claim referral fees are restricted but not eliminated.
What Are the Effects of Injury Claim Referral Fees?
Unfortunately, injury claim referral fees have negative consequences, disproportionately affecting the average person while benefitting insurance companies.
Before government officials put stricter laws in place, insured drivers saw their premiums rise because insurance companies had to cover many accident and injury claims. At the time, personal injury claims were vastly unregulated, and many claims were illegitimate as a result.
Once the Legal Aid, Sentencing, and Punishment of Offenders Act 2012 passed, individuals thought twice about filing frivolous claims, and insurance companies saved their customer’s money.
Now, claimants must follow a procedure, including paying certain fees instead of the defendant. Split costs between the two parties help protect defendants and lower the overall legal fees between insurance companies.
This legislation also prevents personal injury advertisers, insurance companies, and lawyers from charging one another referral fees in exchange for accident claims.
Injury claim referral fee legislation seeks to end individuals or organisations selling someone’s information without their consent. This legislation also cuts down on advertisements from accident and personal injury firms.
