Insurers have slammed the legal services watchdog’s decision to rule out a referral fee ban.
The Legal Services Board, which regulates lawyers, announced today that it has decided not to introduce a ban on referral fees.
Instead the board has decided to introduce greater transparency around the operation of, which is outlined in new guidance.
Under the guidance, consumers must know when referral fees are operating and who they are being paid to. The regime is also designed to improve the regulatory policing of lawyers’ obligations.
The board has promised to undertake a review of its approach to the regulation of referral fees in 2013-14.
Board chairman David Edmonds said: “Before this exercise, the debate on referral fees was characterised by high passions but a lack of hard evidence. Following this detailed investigation, we are persuaded that the interests of consumers are best served by continuing to permit referral fees, but managing their impact through shining the light of transparency on them. We have set out a range of measures that can help achieve this.”
ABI director of general insurance and health Nick Starling said that the industry would now put pressure on ministers to end referral fees following what it described as a missed opportunity by the board to ban them.
He said: “We are disappointed but not surprised by the Legal Services Board’s decision that overwhelmingly favours lawyers. Making referral fees more transparent, as the report recommends, will not stem the growth in the compensation culture or frivolous and exaggerated claims which the practice encourages. This is why they should be banned.
“The government’s much-needed proposals for civil justice to bring about a simpler, speedier and cost-effective compensation system for genuine claimants will only succeed if referral fees are banned. Insurers now look towards Parliament to take the necessary steps and ensure a full ban, which is the only way to protect consume.”
Leading personal injury lawyer John Spencer, who is a director of CS2 Lawyers, also criticised the Board’s decision.
He said: “I find it unfathomable how such incentives cannot be viewed as a detrimental to consumers.
“Only a genuine industry-wide commitment to challenging deeply entrenched commercial interests and eliminating elements which add no value to claimants is the only real solution to guarantee access to justice and the protection of clients.
“It is also clear that the Jackson proposals were always predicated on a ban, or at least a £200 cap on referral fees. The money he envisaged saving through this reduced cost will not now be saved. As a result the people who will suffer ultimately are the accident victims.”
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