Referral fee ban in Scotland reduces whiplash claims – will the UK follow suit?

Posted: 02/08/2012

A recent article in Insurance Age has highlighted the significant impact of the referral fee ban now in place in Scotland on the number of low value personal injury claims that are brought. Research by the Department of Work and Pensions found there were three whiplash claims for every 1,000 residents in both Edinburgh and Dundee in the year to March 2011 - compared to 22 in Liverpool, 21 in Uxbridge, West London, and 20 in Oldham.

The study also revealed that nine of the ten postcode areas with the lowest whiplash claim count were in Scotland. The Law Society rules imposing the referral fee ban have, it is believed, led to fewer claims management companies operating in Scotland, which in turn has reduced the number of people coming forward to instigate a claim.

Many have been concerned at the impact of claims management companies on personal injury claims. Concerns range from the encouragement of individuals to bring small or unmeritorious claims to the impact of the referral fees paid by solicitors (which are often significant) on costs claimed and recovered. In the UK significant reforms to personal injury costs practice and the rules on referral fees are pending. The fact that the referral fee ban in Scotland appears to have reduced the number of low value claims is likely to encourage the new rules on referral fees to be tough so as to reduce the impact and cost of claims management companies.

Philippa Luscombe, head of the personal injury team at Penningtons, said: “We feel that there are currently too many parties who have scope to benefit financially by encouraging individuals to bring claims when the injury or accident circumstances do not merit this. It is hoped that the new regulations will reduce this, but it is important that the rules do not end up being imposed in a way that limits the ability of genuine claimants with genuine injuries to find a good solicitor and bring a claim.”

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