Jackson proposes scrapping of ‘abhorrent’ referral fees

An end to the hugely controversial practice of lawyers paying referral fees to brokers and accident management companies was in sight this week, following Lord Justice Jackson’s review of costs in the personal injury claims system.

Jackson, reporting to justice minister Jack Straw, branded the practice whereby lawyers pay for claimants’ cases “abhorrent”.

In a wide-ranging and controversial report, he also called for an end to the recoverability of after-the-event (ATE) premiums and a 10% rise in the damages awarded to successful claimants.

Straw welcomed the report, saying: “It is a remarkable piece of work, which is based on extensive consultation and puts forward a broad range of significant recommendations for reform. I look forward to considering these proposals in detail.”

There was concern, however, that the reform proposals could be sidelined by an incoming Conservative government.

The insurance industry broadly welcomed the proposals, some of which are designed to cut costs for defendant insurers. Allianz technical claims manager Roy Hebburn said: “The removal of referral fees being paid by solicitors and non-recoverability of success fees and ATE premiums are crucial recommendations in Lord Jackson's proposals to cut costs and deliver speedier justice.

“Insurers should not flinch at the quid pro quo of one-way cost-shifting and the suggested 10% uplift in general damages.

“These changes and the extension of fixed costs in the fast-track claims process will allow insurers to return to an environment of underwriting-led pricing, untainted by non-risk income.”

AXA claims manager David Williams stressed that it was important for the reforms to remain in its current format and not be diluted down.

He added: “My worry is that lots of people will argue over tiny bits of detail and we will not see any progress for years.”

But the changes are a blow to brokers and accident management firms that make money from bodily injury referral fees.

Biba head of technical services Peter Staddon said brokers would be philosophical about the lost income stream if the proposals were implemented, however. “The money is important but it is not the be-all and end-all.

“It is important the client is looked after and that is where the broker will be coming from.”