Referral fees and solicitors costs

The Association of British Insurers, some of whose members do themselves charge solicitors fees for sending them cases, claim that the level of costs in personal injury claims is out of all proportion partly because the payment of referral fees is pushing up those costs. Referral fees are once again the whipping boy.

I have always understood referral fees can never be claimed back as a cost from the guilty party’s insurer or the client and are an expense which the solicitor must bear.

There is apparently a gap of between 25% and 35% between the hourly rates charged by a claimant and insurance companay solicitors in favour of the claimant solicitor. A major reason for this is that the insurers control the level of fees which can be charged by their solicitors.  I dont think any claimant would want their solicitors fees controlled by their insurance opponents!

In the days of legal aid in personal injury cases one was paid for one’s work as a claimant solicitor whether or not the claim succeeded. Those days are long gone and I find myself doing a very substantial amount of work for which I am never paid in cases which do not suceed but where clients are seeking advice entirly appropriately about prospects of success. In sharp contrast a solicitor acting for an insurance company can reasonably be expected to be paid for all the work he or she does.

In my view the insurance industry needs to acknowledge that it now bears the cost of failed cases as well as successful cases in that they are, through the success fees charged by solicitors in successful cases, being obliged through public policy to go some way towards meeting the cost of unsuccessful cases. Claimant solicitors charge more because the risk they face of not being paid is so much greater.  They should also acknowledge the benefit they recieve from claimant solicitors sifting out claims which are unlikely to succeed particularly in the context of occupational illness claims prior to any claim being made.

The defendant solicitors win on the swings because they can expect to be paid for all or most of their work, whereas claimant solicitors win on the roundabout because they get higher fees for those cases which are successful.  One cannot consider costs in isolation. 

In my view Insurers need to look closely at whether by being more active themselves in tackling claims, and also by improving the training of their staff they can cut out the inevitable costs created by delay and inefficiency in their offices.

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