Following the passing of the Act of Parliament to ban referral fees for personal injury cases the Ministry of Justice has told Claims Companies that they face further restrictions as they will no longer be able to offer incentives.
Claims companies are only a recent invention and came about when the Law Society relaxed the rules on allowing Solicitors to “buy in” personal injury work in the late 1990’s. They are now set to disappear just as quickly as soon as the ban on this trade comes into effect in April 2013. Basically the Government wants to pour cold water on a trade it sees as ‘on fire’ and fuelling a rise in the cost of claims and hence insurance premiums.
Not only will they be banned from selling details of injured clients to solicitors but they are also to be forbidden from offering incentives to claim. Recent adverts have included inducements by way of immediate cash payments, vouchers, ipads etc and due to market pressures solicitors have also been drawn into this feeding frenzy. This will also be outlawed in April according to a Special Bulletin issued by the Ministry of Justice.
Also set to finish will be “refer a friend” schemes as all payments of whatever kind will be caught by the ban.
It is clear that claims companies will not be able to trade after April 2013 leaving only Solicitors practices and new ABS (Alternative Business Structures) governed by the Solicitors Regulation Authority approved to attract and conduct personal injury claim work. Many claims companies are in denial about the impact of the new rules and think that becomming an ABS is an easy work around. This has been spotted by the Ministry of Justice who, according to the bulletin, “will be contacting [claims companies] towards the end of the year to confirm what their intentions are when the ban comes into force”.
The end is nigh and long overdue.