TSC chair Louise Ellman wants to find out if ABSs are used to side-step the referral fee ban

Transport Select Committee chair Louise Ellman will be asking the industry for evidence to find out whether or not alternative business structures are being used to get around referral fees.

At a Hill Dickinson fraud briefing yesterday, Ellman raised concerns over whether referral fees are re-emerging under the ABS structure.

She said: “We now have a new structure - alternative business structures - where it is possible for all of these players to be under one roof.

“We are interested to know how they are operating and whether the referral fees are re-emerging under a new structure. It’s an area that needs some new investigation. It’s a very important area.”

In January 2012 the law was changed to allow non-lawyers and external investors to enter the legal services market by setting up an alternative business structure.

Since then a number of insurers and brokers set up their own ABSs - Motorbike specialist broker Carole Nash set up its legal arm Carole Nash Legal Services LLP in a joint venture with solicitors firm NewLaw in November, while Allianz UK launched a legal division, ALP Law, in partnership with law firm Serious Law in March.

Admiral has also formed joint ventures with two law firms, DAS took one over and used it to set up its own ABS, Ageas struck a partnership deal with a firm of solicitors and Abbey Legal Protection turned its legal advice division into an ABS.

The AA and Direct Line have also been granted licences to set up alternative business structures.

Insurance companies are free to choose any type of company for an ABS, as long as they meet the Solicitors Regulation Authority’s regulatory requirements, such as having a lawyer manager and a head officer for legal practice.