Solicitor.info Blog

The number of personal injury claims filed in the High Court jumped 32% between 2006 and 2008, research has found.

Claims relating to personal injury jumped 31.8% from 914 in 2006 to 1,205 in 2008, according to a study of the latest available figures by legal information provider Sweet & Maxwell.

The rise comes despite attempts to reduce personal injury claims under the Compensation Act 2006, which imposed registration requirements on claims management companies and created the Ministry of Justice’s claims management regulator.

Citing anecdotal evidence from law firms and insurers, Sweet & Maxwell suggested that the recession is behind the rise in personal injury claims, with individuals claiming because they were under financial stress. At the same time, insurers suffering from weak investment returns were more willing to contest claims, Sweet & Maxwell suggested.

The future for the conveyancing market in England and Wales lies in partnerships between solicitors and estate agents to provide a one-stop shop for sellers, the new president of the E-Homebuying Forum has told the Gazette.

Sir Bryan Carsberg, who is also a former director of the Office of Fair Trading, said he would like to see solicitors and estate working together, as they do in Scotland.

Carsberg said he would also like to see estate agents regulated, so that customers know what standards to expect and have some form of redress when things go wrong.

Carsberg said: ‘The Scottish system, where solicitors employ estate agents, works well.’ He added that customers would benefit from a one-stop shop if solicitors in England and Wales went into partnership with estate agents and others involved in the conveyancing process.

‘When you see the links that some solicitors and estate agents already have, multi-disciplinary partnerships are surely the next step? They are coming, but they are taking their time,’ he said.

Carsberg said: ‘With the current arrangements, there’s a feeling that estate agents and solicitors are wary of each other. If they were working in the same firm they would be pulling in the same direction.’

He predicted solicitors would play a ‘big part in a new vigorous and competitive market’, and suggested preliminary and binding contracts between vendors and purchasers could be entered into at the offer and acceptance stage, which lawyers would be at the centre of.

Law Society property spokesman Paul Marsh said: ‘I’d like to see solicitors taking advantage of all the opportunities open over the next two or three years to be able to sell property and give clients a one-stop shop.’

But he said the only way that will be achieved is for there to be the same degree of regulation for estate agents as there is for solicitors, which ‘means estate agents have to be regulated’.

Richard Barnett, chairman of the Law Society’s conveyancing and land law committee and senior partner at volume conveyancing firm Barnetts, said: ‘A one-stop shop is a great idea. That’s what we already do, working in partnership with estate agents. The Legal Services Act will make the arrangements much easier.’

Marketing director at MDA SearchFlow David Kempster said: ‘Alternative business structures represent significant threats or opportunities, depending on the appetite to be reactive or proactive.’

‘Online connected processes, including streamlined data and document management, will be key to protecting margins, and onward survival. An ABS structure, together with access to venture capital and a hybrid of skills in a group within the ABS, could form a potent mix, delivering local expertise to counter the national brand assault,’ he said.

by Catherine Baksi Law Gazette

Is the referral fee debate over? Two reports submitted recently to the Legal Services Board (LSB) would make one think that it is, even though the board itself has still to reach a final decision. First came an economic impact analysis, commissioned from Charles River Associates (CRA), which found that not only do referral fees in personal injury (PI) and conveyancing not harm consumers, but they actually result in cheaper conveyancing fees and improved access to justice for injured people. It said there was no case to ban them or take any other regulatory action. The analysis said that, in PI, success rates in motor claims have not declined, while there was no evidence of solicitors under-settling claims because of the pressure of lower margins. Contrary to the claims of the insurance industry, CRA said there was also no evidence that increases in referral fees have led to an increase in the price of legal services. Though insurance premiums have probably increased, it said, this was partly offset by the referral fees that insurers themselves receive. In any case, it was ‘difficult to describe this as detriment’ as the rises were caused by consumers exercising their right to bring a claim. Researcher Kyla Malcolm told an LSB press briefing that ‘consumer evidence has supported the link between marketing and making additional claims which would not otherwise have arisen’. The study reviewed existing research and also carried out empirical interviews with 42 stakeholders and a survey of estate agents. Panel games Two weeks later came the much-anticipated report of the Legal Services Consumer Panel, which has spent some months on this, its first project, gathering evidence and talking to consumers. The conclusion was that referral fees should not be banned – although the LSB should review the market again in three years’ time – but that there should be greater disclosure and more stringent regulation. In PI this could include a ban on auctions for work. The panel also called for referral fees to be openly factored into the calculation of fixed-fee regimes and the guideline hourly rates as ‘business acquisition costs’. It will also return in future to the question of choice of solicitor, having noted the situation in relation to legal expenses insurance. The panel did identify several areas of concern and said it ‘has its reservations about referral arrangements’. But it also found no evidence that referral fees increase legal costs or reduce the quality of work, or that lawyers provide biased advice in order not to lose work from introducers. In PI, the panel said claims management companies and not-for-profit bodies have helped more people to achieve redress and increased access to justice without fuelling a ‘compensation culture’. It explained: ‘Insurers settle over 90% of road traffic accident claims, suggesting that excessive or fraudulent claims are rare.’ The Advisory Committee on Civil Costs told the panel that its own investigation into the impact of referral fees on the guideline hourly rates concluded that claims management companies are not making excessive profits. This is the first word of this long-awaited report, but at the time of writing the committee had still not had permission from the Ministry of Justice to publish it in full. Focus groups commissioned by the panel uncovered widespread ignorance of and discomfort with the existence of referral fees. However, the researchers, Vanilla Research, described the ‘promise of transparency’ over arrangements as a ‘game-changer’ by addressing consumer concerns around charges, suitability of lawyer and freedom of choice. In PI, the panel highlighted two particular problems: closed bids and auctions mean that work is referred to lawyers paying the highest referral fees, not the best quality lawyers; and competition concerns raised by the trend for introducers to refer work to a small number of large law firms. Shocked consumers Deciding that referral fees nonetheless have a place in the market, the panel made 12 recommendations, including action to ‘replace the current hotchpotch of rules with a consistent set of regulatory arrangements for lawyers and introducers’; improved transparency requirements; and mystery shopping and enforcement action to tackle breaches of transparency rules. It also said regulators should issue guidance on the circumstances under which a dependency on referral arrangements creates a risk of conflict, and that the Office of Fair Trading should consider investigating whether competition in relation to introducer panels is working effectively. Though in relation to conveyancing, the panel said consideration should be given to clients having to give their written consent to being referred for a fee, chairwoman Dr Dianne Hayter said this would not be practical in PI cases because so much of the upfront work takes place over the telephone. She added: ‘Consumers are surprised, even shocked, that lawyers pay referral fees, but they are willing to tolerate this so long as such transactions are conducted in the open. Greater transparency, combined with tough action against rule-breakers, is needed to ensure that referral fees work in the interests of consumers.’ Measured approach The panel has no authority, but its report will be fed into the LSB’s ongoing process of deciding whether it should take any action on referral fees. Hayter said she would expect the board to heed the report’s findings. The LSB is taking a measured approach to deciding the way forward on referral fees, but it is hard to see, in the light of what it has been told so far, how it could now decide that such a radical action as returning to the ban is justified, even though the consumer panel report in particular does identify plenty of poor practices and consumer disquiet with referral fees. The board should make its views known in the next couple of months. It could decide simply that further investigation is required, which by perpetuating uncertainty would arguably be the worst of all worlds.

Monday 14 June 2010 by Neil Rose legal Gazette