Posted by Nick Jervis of Samson Consulting, a Legal Futures Associate.
Lord Justice Jackson: will referral fee ban encourage BTE insurers to do the whole claim themselves?
I have read with interest the letters in the Gazette about personal injury claims and referral fees over the last few weeks following the release of the Insurers’ report (aka the Jackson report). Some have said that banning referral fees will be good as the smaller firms will all have to start advertising to produce their own new client enquiries, whilst others have said that before-the-event (BTE) insurers will run all cases in-house, removing the need for the current large law firms that service BTE clients. I certainly agree with this second point to a degree.
However, there will simply not be enough work for all of the large firms currently servicing BTE legal expense insurers. Some of them, currently spending tens of thousands of pounds a month to acquire hundreds of new personal injury cases to feed their fee-earners, will be left with no sources of new work. Whilst this budget could be spent on new advertising campaigns for them, these would take time, effort, and energy (along with proven marketing skills which perhaps are not in place) to build steam and to produce the sheer volume of leads that they need each month.
In my opinion, it will be much quicker for these firms to simply purchase the claims companies that are already generating the leads that they so desperately need. With a potential ban on referral fees, this provides a good solution for both parties.
My real concern is for the smaller firms left behind; the ones that provide an excellent service but do not have tens of thousands to spend every month on generating new leads. They simply will not be able to compete. I have already seen a marked increase in the number of these firms approaching me for help over the course of the last six months, and it is increasing month by month. All of them comment that they are finding it harder to attract new personal injury clients every month. They simply cannot seem to attract them with their limited marketing budgets.
My real concern is that these changes could mean the end of the high street law firm for personal injury claims and the end of access to justice for many people across the UK.
What do you think? I believe that now is the time for some concerted action for these smaller law firms, to ensure that they can survive post Legal Services Act, post Jackson and post the banning of referral fees (if that can ever be achieved).
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