The Motoring Uninsured Loss Recoveries Association (MULRA) has warned that more CCFAs will lead to higher premiums for most classes of insurance, and lower competitiveness in the intermediary market.
The Motoring Uninsured Loss Recoveries Association (MULRA) has warned that more Collective Conditional Fee Arrangements (CCFAs) will lead to higher premiums for most classes of insurance, and lower competitiveness in the intermediary market.
The association said despite this, CCFAs linked to Before-the-Event Uninsured Loss Recovery (ULR) policies were still likely to be insurers' next target, as the industry tried to lower claims settlements and keep premiums in check.
It said CCFAs were the latest means of extracting bigger payouts from third party insurers.
Such agreements between ULR underwriters and solicitor firms are relatively easy to set up. The client is indemnified but the solicitor takes on the case for nothing, in the expectation of winning costs plus a success fee.
On a typical case with legal fees of £1500, this would attract a £300 uplift, some of which might be diverted into commissions to the ULR provider.
MULRA chairman David Haynes said: "CCFAs are a perfectly legal way to handle ULR claims.
"They are also an unwarranted burden on third party insurers where before-the-event cover is in place.
"Some ULR firms, which have suffered from dwindling premium levels, are being tempted to go down the CCFA route in order to survive.
"There are of course superficial attractions but they are making themselves vulnerable in the volatile ULR marketplace."
Haynes added that MULRA members did not wish to jeopardise their good relationship with third party insurers for the sake of "a quick buck".
"Like other attempts to inflate settlements, it will all end in tears - and for the courts to decide," he said.
Haynes said MULRA viewed conventional before-the-event cover as the best option, and warned the industry to be on its guard against arrangements like CCFAs.
