Insurers, loss adjusters and claims managers among those exploring law partnerships

The Solicitors Regulation Authority (SRA) has received a flood of calls from insurance industry-related professionals about taking a stake in law firms, as some organisations aim to sidestep the referral fee ban.

The SRA told Insurance Times that it had received around 500 calls, had in-depth discussion with 50 firms and 15 other very serious discussions about the possibility of taking a stake in a law firm once rules allow alternative business structures (ABSs), probably by the end of the year.

The impending amendment to the Legal Services Act 2007 is known as ‘Tesco Law’ because it allows organisations, such as the supermarket chain, to own majority stakes in law firms.

Legal expenses firms DAS and Arag have declared their interest, while online broker Brightside and claims management firm AI Claims Solutions are also interested in taking a stake.

Loss adjusters, legal expenses firms, claims management companies and in-house legal teams are just some of the insurance industry-related firms that have discussed ownership with the SRA.

Ownership would mean an organisation could pass on referrals and share profits from the law firm, rather than receiving an upfront fee. No details have yet come out on the referral fees ban, but it is unlikely the government would impose restrictions on Tesco Law simply because of referral fees.

Meanwhile, the SRA is continuing to work with the Legal Services Board and Ministry of Justice on the parliamentary timetable for change. It was hoped that ABSs would be introduced over the summer, but it is now likely to be at the end of the year.

Pass notes: Tesco Law

What impact will Tesco Law have on the referral fee ban?

Some believe Tesco Law will pave the way for referrals to continue via the back door. That is why insurer bosses want the referral ban backed with a cut in lawyers’ fixed costs.

What other effects could it have?

If high street retailers were to incorporate legal outlets into their stores, it would be far easier for customers to take legal action for slips, trips and other personal injury claims. Brit is warning that it could be hazardous for law firms’ risk management to open up to outside investors, potentially fuelling an increase in professional indemnity insurance.