LSB vetoes total ban on accident claim referral fees

The personal injury lawyers‘ regulatory body for England and Wales, the Legal Services Board recently came out against a proposed total ban on accident claim referral fees.

Stating instead that it would prefer to strengthen transparency in an attempt to prevent abuses in the personal injury claims system, the LSB announced the decision at the tail end of its review based on advice, consumer research, and economic analysis from the Legal Services Consumer Panel.

The Board’s new guidelines makes it a requirement for regulators to ensure consumers are informed when referral fees are in operation and to whom the referrals are being disbursed.  The LSB also made provisions in regards to offering increased flexibility to approved regulators in the sector as well.

David Edmonds, chairman for the LSB, remarked that the regulatory board made the decision that continuing to permit referral fees is in the best interests of consumers, provided their impact upon consumers was managed by making the process more transparent.

The Association of British Insurers, which directly opposed referral fees and has said publicly that they should be banned, was critical of the LSB report.  A spokesperson for the ABI stated that the report disregarded the views of nearly all of its respondents, including the Law Society and insurers, who expressed disagreement with the referral market analysis as chosen by the LSB.

Nick Starling, director of general insurance and health for the AMI, also commented by stating that even if referral fees were made more transparent under the report’s recommendations, it would not lead to a curbing of exaggerated or frivolous claims or the compensation culture which the practice encourages.  It is for this reason why referral fees should be banned, Mr Starling added.

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