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COPY FROM BBC website of the Jack Straw story:
Jack Straw calls for reform of car insurance industry
Many car insurers are making money by selling details to personal injury lawyers Continue reading the main story
Former justice secretary Jack Straw is calling for reform of the motor insurance industry.
He says insurers are getting paid for referring clients' details to personal injury lawyers without permission.
In an article for the Times, Mr Straw describes the spiralling cost of insurance - caused by referrals to personal injury lawyers - as a racket.
The Labour MP for Blackburn says he is acting on the concerns of constituents who face rising premiums.
Mr Straw is calling for the government to implement recommendations made last year by Lord Justice Jackson, who said such referral fees should be banned.
"It's become a huge racket," Mr Straw told the Today programme. "The insurance companies are complicit in this. They should and could have said this is outrageous."
He said senior executives from two of the country's largest insurers had admitted to him that it was the industry's "dirty secret".
"They said, 'If we don't do it everyone else will be doing it'.
"The garages, the recovery firms - even the police are selling on this information."
Mr Straw is also angry at the high-pressure tactics of legal firms who handle personal injury claims.
He told the BBC that a friend was "bombarded" by calls and texts urging him to claim compensation after an accident, despite being uninjured and having not given permission to be contacted.
Whiplash injuries
Earlier this year a report from the Transport Select Committee also detailed how firms are paid referral fees for giving lawyers the names of people involved in crashes.
Mr Straw says whiplash injuries are a particular problem and now made up 80% of all claims, even though they were usually entirely trivial.
Road accidents involving personal injury has actually fallen since the mid-1990s He added that premiums were going up despite safer roads and improvements in car safety and security, meaning sharp drops in thefts and accidents.
In 2009, the number of road accidents involving personal injury was 31% down on the average for 1994-98.
Thefts of and from a vehicle have slumped - down almost three-quarters (72%) between 1995 and 2010.
But the cost of personal injury claims has doubled in 10 years (from £7bn to £14bn) and motor insurance premiums have shot up, by at least 30% in the last year.
Support from insurers
The Association of British Insurers' Director General Insurance and Health, Nick Starling, said: "We are pleased that Jack Straw has joined our call for referral fees to be banned.
"It is not right that people take cash for tipping off lawyers about accidents which fuel personal injury claims, driving up costs for all motorists.
Speaking to the BBC, Mr Starling admitted the system was "absolutely in need of reform" and added that he would be asking Justice Secretary Ken Clarke to take action.
However, he also appeared to partly defend insurers that take referral fees from lawyers.
"If they [insurers] stopped taking this money, if it went out of their control, everyone else would be taking it - which is why they have to be banned outright.
"You can't have one part of the system stopping it and everyone else carrying on. It wouldn't solve the problem."
Mr Starling added that insurers weren't profiting overall and last year had made a "large loss".
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There is no such thing as Compensation Culture. Any Solicitors operating no win no fee claims will only take on a claim that is a winner because otherwise the Solicitor will not get a fee. That is what no win no fee means.COPY FROM BBC website of the Jack Straw story:
Jack Straw calls for reform of car insurance industry
Many car insurers are making money by selling details to personal injury lawyers Continue reading the main story
Former justice secretary Jack Straw is calling for reform of the motor insurance industry.
He says insurers are getting paid for referring clients' details to personal injury lawyers without permission.
In an article for the Times, Mr Straw describes the spiralling cost of insurance - caused by referrals to personal injury lawyers - as a racket.
The Labour MP for Blackburn says he is acting on the concerns of constituents who face rising premiums.
Mr Straw is calling for the government to implement recommendations made last year by Lord Justice Jackson, who said such referral fees should be banned.
"It's become a huge racket," Mr Straw told the Today programme. "The insurance companies are complicit in this. They should and could have said this is outrageous."
He said senior executives from two of the country's largest insurers had admitted to him that it was the industry's "dirty secret".
"They said, 'If we don't do it everyone else will be doing it'.
"The garages, the recovery firms - even the police are selling on this information."
Mr Straw is also angry at the high-pressure tactics of legal firms who handle personal injury claims.
He told the BBC that a friend was "bombarded" by calls and texts urging him to claim compensation after an accident, despite being uninjured and having not given permission to be contacted.
Whiplash injuries
Earlier this year a report from the Transport Select Committee also detailed how firms are paid referral fees for giving lawyers the names of people involved in crashes.
Mr Straw says whiplash injuries are a particular problem and now made up 80% of all claims, even though they were usually entirely trivial.
Road accidents involving personal injury has actually fallen since the mid-1990s He added that premiums were going up despite safer roads and improvements in car safety and security, meaning sharp drops in thefts and accidents.
In 2009, the number of road accidents involving personal injury was 31% down on the average for 1994-98.
Thefts of and from a vehicle have slumped - down almost three-quarters (72%) between 1995 and 2010.
But the cost of personal injury claims has doubled in 10 years (from £7bn to £14bn) and motor insurance premiums have shot up, by at least 30% in the last year.
Support from insurers
The Association of British Insurers' Director General Insurance and Health, Nick Starling, said: "We are pleased that Jack Straw has joined our call for referral fees to be banned.
"It is not right that people take cash for tipping off lawyers about accidents which fuel personal injury claims, driving up costs for all motorists.
Speaking to the BBC, Mr Starling admitted the system was "absolutely in need of reform" and added that he would be asking Justice Secretary Ken Clarke to take action.
However, he also appeared to partly defend insurers that take referral fees from lawyers.
"If they [insurers] stopped taking this money, if it went out of their control, everyone else would be taking it - which is why they have to be banned outright.
"You can't have one part of the system stopping it and everyone else carrying on. It wouldn't solve the problem."
Mr Starling added that insurers weren't profiting overall and last year had made a "large loss".
****************************************************************************
Any Claimant who starts court proceedings and loses can be ordered to pay costs. To protect against that risk many no win no fee claims come with LEI (legal expenses insurance) so that if the Claimant loses the claimant's insurers will pay. The LEI insurer will have reviewed the case and determined if it is a winner before offering cover.
That is two parties keen to ensure that the claim is a winner-the lawyer and the LEI insurer, along with the Claimant.
The ABI perpetuates the myth of compensation culture because whipping up a storm is the best defence to the charge that the insurance industry has mismanaged the setting of premiums for yeears. Any black hole in insurance companies' reserves is as a result of mismanagement NOT as a result of claims being made by injuyed people.
Look at how the ABI addressed the issue of referral feees "we dont like them but we earn them because if we didnt someone else would". That is the height of the moral ground occupied by insurers.
There is nothing dysfunctional about the claims system. It operates very well. people who are injured recover compensation and their lawyers are paid their costs. What the insurers want is for the claimant's lawyer's costs to be paid by the claimant out of the claimant's damages. Is that fair? A claimant may deal with his case expeditiously. Reports may be obtained. the defendant insurers may not wish to pay out and so create delay. Delay will cost the claimant a share oif his compensation through no fault of his own as his lawyer's costs will have increased.
The system that operates in the Englisha nd Welsh civil Court system is that thye losre pays.
The insurance industry whinged about legal aid for personal injury claimants. the Government introduced CFAs (no win no fee). At the same time Claims management Companies emerged on the scene. They gathered up claims and sold them to personal injury lawyers. The defendant insurers adopted tactics of directly contacting claimants, even when they knew the claimant had a lawyer to negotiate a settlement ie pressure the claimant into accepting less than would be obtained through legal settlement or a court case.
Now referral fees are the problem, according to ABI.
However the real problem is yet to come.
Claims management companies who have not been able to conduct cases will be able so to do under legislation that takes affact in October this year. Alternative Business Structures will be able to undertake legal work when the Legal Services Act takes affect. It is believed that many Claims Management Companies will convert to ABSs and conduct personal injury claims. the advertising will increase. The conduct of personal injury claims will becaome more like a High Street bread price battle between tow hughe supermarket chains with the claimant's representatives being determined to earn as much profit as possible (never mind the client) and with insurers screaming about "compensation culture" [one, they ironically fuel through accepting referral fees].
The Legal Services Board regulates the regu;lators. the Board has a Consumer panel. That panel likes referral fees and despite many Solicitors saying that referral fees are a disgrace, wont recommend abolition.
My firm will only take referral fees from other Solicitors. If we refer a client to another firm that undertakes a certain area of work we may get a referral fee. We will not pay referral fees to estate agents or claims management companies. many Solicitors will not.
As the client you are entitled to know if the Solicitor to whom you were referred paid the reefrrer for that referral. Was the Solicitor chosen because he is great at his job or because he pays the referrer? You are entitled to know.
The Government wishes to unleash ABSs on the public. I don't think they know what they are doing.
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