Bott and Co asked a range of service providers in the personal injury sector, including insurers, CMCs and law firms, for their responses to statements about the current situation in the industry and the proposed changes coming in April 2013.
With much debate in the media and within the industry itself, there are clear opposing views on the changes and strong feeling about how the proposals have been decided and how they are to be implemented with the Association of Personal Injury Lawyers set to issue a Judicial Review of the Portal Fees.
This Personal Injury Survey is one of the industry’s largest surveys with over 100 respondents from across the sector taking the opportunity to have their say. We’ve compiled the results below and included some of the most pertinent comments and this will form part of our own response to the MOJ consultation on Portal Fees.
Of those surveyed, the most defining statement came with regards to the changes in Portal Fees, and the implementation of the Jackson Reforms.
* 96% of those surveyed thought the MOJ’s proposed 60% reduction in Portal fees is excessive, and 94% believed it would lead to a reduction in access to justice for injured people.
* In addition, 96% said personal injury firms will find it difficult to operate under the proposed reduced Portal Fees.
* 85% of those surveyed said that the legal industry was not sufficiently consulted on the Jackson reforms, and the industry does not need the extent of change they will bring. Furthermore, 89% believe it will reduce access to justice for injured people.
This survey was only made possible by the huge number of people who took part. In return, please feel free to use the data and graphs for your own use. All that we ask is that you reference this page by linking back to this article. If you need more information on how to do that, or would like the data in another format, please contact us here
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The MOJ’s proposed 60% reduction in Portal fees is excessive.
With the extension of the RTA (Road Traffic Accident) Portal to include EL/PL cases and with the limits increased to £25,000 from £10,000 it would seem counter intuitive to then reduce the fees for law firms for handling a wider range of more complex cases. The proposed reduction from £1200 to just £500 is approximately a 60% decrease and 96% of respondents agreed or strongly agreed that the cuts were excessive.
“The ‘what we had minus referral fees’ is overly simplistic and fails to have sufficient, if any, regard for the irreducible minima.” Jon Williams
“The original fees took no account of the existence of referral fees.” Anonymous
“It will deny solicitors the ability to market their services and to compete on any level with new entrants to the market with the power of big brands behind them and no acquisition costs (because they already control the clients).” Anonymous
The knock on effect of the reduction in Portal fees will be a reduction in access to justice for injured people.
One of the concerns voiced by the claimant industry and by those groups representing injured people is that the reduction in Portal fees could result in smaller claims becoming financially unviable for law firms and therefore injured people not able to secure adequate representation against insurers. An overwhelming 94% of respondents agreed or strongly agreed that the reduction in Portal fees will result in reduced access to justice for injured people and significantly no-one strongly disagreed with this statement.
“The Government proposals would potentially be in breach of articles 6 (access to justice) and 14 (fair treatment) of the European Convention on Human Rights, and consequently illegal.” Dr Donald MacKenzie (CIUKS.co.uk)
“If solicitors are unable to compete they will go out of business and there will be no alternative to using your insurance company to manage your PI claim. In addition, without the income from the fast track cases, solicitors will not be able to fund serious injury claims and the people who need independent advice the most – those who have been catastrophically injured – will be unable to get it at any price.” Anonymous
“Quality of claims handling will deteriorate. Firms will look to run the claims as cheaply as possible which means [hiring] people of lower skills sets on minimum wage.” Anonymous
The Portal fee changes will damage the ability of non-insurers to generate cases.
With claimant law firms already operating on narrow margins, reducing the Portal fees takeaway what marketing budget was available and could affect the ability of non-insurers to find work. In addition, law firms that did not pay referral fees could be considered to be losing out twice. Nine out of every ten people surveyed believed that non-insurers will find it more difficult to generate cases under the proposed changes.
“The proposed fees allow no marketing or acquisition budget. Referral fees were one of the cheapest forms of acquisition. With the banning of referral fees, the portal fees should be increased, not decreased, to enable solicitors to compete with the insurers’ marketing budgets.” Anonymous
“Insurers will dominate the market as the profit in cases will not support competitive marketing.” Craig Jenkins, Graham Evans & Partners LLP
“A charter designed by the insurers imposed by government. Ugly.” Julian Oldfield, Bakers Solicitors
Personal injury firms will find it difficult to operate under the proposed reduced Portal fees.
One of the common concerns is about the future prospects for law firms, particularly those specialising in personal injury, under the Portal fee proposals. With income effectively being slashed by 60% any law firms that do continue to operate will have to find ways to slash their costs, potentially impacting on the quality of their work. Tellingly, only 1% of respondents disagreed that personal injury firms will find it difficult to operate.
“If we continued PI work we would close, no ifs or buts.” Andrew Doyle
“We will see lots of very good firms go to the wall causing unemployment and suffering. We will see huge consolidation and only a few big players doing all the work. Less freedom of choice for accident victims and more conflict.” Donna Scully, Carpenters
“The reduced Portal fees will make it more difficult to operate the traditional law firm model, although that model has been under pressure for some time in any event and for a variety of reasons.” Ed Foulkes, Partner, Clarke Willmott LLP
The ban on referral fees will benefit…
Referral fees have been paid by law firms to claims management companies in exchange for personal injury cases in what is essentially an outsourcing of marketing in order for law firms to concentrate on dealing with cases. This will all end in April 2013 as part of the Jackson reforms but who wins from the ban on referral fees? Of the people surveyed, 77% felt the ban benefits insurers, while 91% believe CMCs will lose out compared with 72% stating PI firms will suffer. More importantly perhaps is the fact that only 16% of respondents agreed that injured people will benefit from the ban.
“It is interesting to note that the SRA consultation on how it proposes to deal with the ban notes that the LAPSO ban relates to “claims” and not defended matters (with a query over counterclaims). It will not take long, I am sure, for insurers to realise this. Although the general pool of defended cases will inevitably reduce, they will still be able to benefit from referral fees. This might also add to the conflict which already exists on whether defendant solicitors can bring counterclaims on behalf of insured defendant clients.” Vanessa Shenton
“A pointless waste of time. Clients never paid referral fees and were never affected by them. The genie is out of the bottle and everyone upon everyone will look for ways around the ban.” Julian Oldfield, Bakers Solicitors
“Those firms who have taken the initiative to market themselves through TV or radio advertising and steer away from CMCs will be better placed in the marketplace, however having said that the traditional law firms will still struggle as they currently stand.” Anonymous
The referral fee ban will result in lower insurance premiums for motorists
One of the arguments for the ban in referral fees is that savings made by the insurers can be passed on to motorists to counter balance the rising cost of motor insurance cover experienced over recent years with the AA reporting an increase of 15% for premiums in 2011. This claim is met with some doubt by respondents with less than one in ten agreeing with the statement that the referral fee ban will reduce motor premiums.
“The costs savings already made by the introduction of the portal have not led to reduced premiums. (Although fixed fees in non portal cases have not increased for 10 years, premiums have continued to rise).” Beth King
“There is no evidence to suggest that premiums will decrease as a result of the ban. The impact on insurers will be a net zero – they will have a discount in respect of the costs they pay, but this will be offset by the loss of income that they currently receive from referral fees. They will therefore be in no better a position. The recent Fraud investigation bureau report on the cost of fraudulent PI claims used a method to calculate the cost which basically admitted that insurers continue to pay claims that they know are fraudulent. If they fought some of these cases they could afford to reduce premiums.” Anonymous
There has been adequate clarity and guidance on the details around the referral fee ban.
While the date for the referral fee ban was set some time ago as April 2013, details around the specifics and how the ban will be implemented and policed have not been forthcoming. Law firms therefore have found it difficult to prepare for the ban or develop business continuity plans in the absence of suitable information. Only 8% of people surveyed believed to some extent that there has been enough clarity and guidance.
“No proper consultation with the industry as a whole prior to LASPO and the SRA have been very slow in setting out their position. The Law Society has not acted as a voice for their members in any way.” Anonymous
“The SRA are consulting currently, but it does not appear that its take on the legislation is necessarily accurate. It will be difficult for firms to know what they can and cannot do and many will fear hindsight decision making by the SRA who more and more is becoming a body that bows to government pressure rather than being an independent regulator.” Vanessa Shenton
“Complete shambles!” Craig Jenkins, Graham Evans & Partners LLP
The legal industry did not need the extent of change the Jackson reforms will bring.
Lord Justice Jackson’s report in 2010 set out a number of recommendations, many of which were included in the LASPO bill, set to come in to force in April 2013. They represent a major shift in the way the industry currently operates and half of the people surveyed strongly agreed that the extent of the changes were not needed. Only 5% disagreed or strongly disagreed with this sentiment.
“It’s too much too quickly. There are far better wins to be had. See MASS Code and APIL’s 10 point Whiplash document.” Donna Scully – Carpenters
“The industry is focused on bringing access to justice for innocent victims of road traffic accidents. The Jackson reforms have completely disregarded the rights of the most important people involved of all of this, the innocent victims.” Nick Spain
“There is a fair perception of a ‘sledgehammer to crack a nut’ although my own data supports the prima facie belief that costs have spiralled in recent years and that the CFA regime has been greatly abused (be that by many law firms or just by the ‘repeat offenders’ who routinely over-egg the pudding). There are problems, of course, but I have sympathy for the belief that access to justice may be eroded by the perhaps over-zealous reforms.” Jon Williams
The Jackson reforms will improve access to justice for injured people
To what extent the Jackson reforms will benefit injured people remains to be seen. Respondents to this survey believe that access to justice will be negatively impacted with 9 out of 10 disagreeing to some extent with our statement. Only 3% strongly agree that the reforms will improve access to justice for injured people.
“As the small claims limit increases this will leave a huge percentage of injured people having no proper access to justice at all. This will only benefit insurance companies, who are highly unlikely to reduce our premiums!” Anonymous
“The government simply does not understand the whole market place dynamics as evidenced by the wholesale changes that are due to be implemented. The intention of the government is clear in that they wish to save the defendant insurers money under the misapprehension that they will behave responsibly and reduce car insurance premiums for all. That will not happen and the injured people will simply be denied access to compensation that is already below levels awarded in other jurisdictions.” Anonymous
The legal industry has been sufficiently consulted on the Jackson reforms before they are enacted
With concerns over the impact of the Jackson reforms and the resulting LASPO bill from claimant lawyers, the questions had been raised around the extent to which claimant representatives had been consulted. More than half of respondents strongly disagreed that there was sufficient consultation with a further third of people disagreeing to a lesser extent.
“We weren’t consulted at all; and although I went to see my MP about the changes, he thought PI firms COST the government money and thought we used Legal Aid funds! He was totally ignorant.” Anonymous
“Consultation process has been a paper exercise with views completely ignored as the decisions appear to have been made pre-consultation.” Anonymous
“The driving force behind the reforms appears to have been insurance industry leaders with very little valued input from the legal industry taken into account.” Nick Spain
Our business model is able to withstand the effects of the Jackson reforms
One wonders what will exist of the personal injury sector after April 2013. With reduced fees, difficulty in finding cases and a fog surrounding any details of how referral fee bans are to be implemented you could forgive law firms for wondering how to adjust their business model to survive. This question drew the most even response in the survey with a third of people concerned about their business model, just under a third agreeing they could withstand the reforms and just over a third neither agreeing nor disagreeing with the statement.
“Don’t have enough details yet to determine whether we can all survive! What a sham.” Julian Oldfield, Bakers Solicitors
“We will survive but we cannot guarantee being able to provide the level of service that we currently do.” Anonymous
Alternative Business Structures (ABS) will improve the quality of legal services provided to injured people.
The advent of the ABS, established by the SRA as a means of non-lawyer ownership of legal practices, to enable law firms to attract external investment or for existing brands to provide legal services in what had been coined as ‘Tesco law’ may impact on the quality of service according to our survey results. Just under half disagreed with the statement and no-one strongly agreed that ABS will improve the quality of legal services.
“The ABS issue has nothing to do with fees or the referral fee ban, save that the timing of the 2 issues coming together as they have has highlighted the lack of thought that has been given to the impact of the referral fee ban. To avoid a drop in income as a result of the ban, insurers will set up their own ABSs, which will be in unfair advantage over solicitors firms who don’t have the ability to attract clients away from their insurers.” Anonymous
“Benefits to both, we can open up the field which will mean there is more transparency however, if this encourages business structures similar to the call centres you get at some insurance companies I cannot see how this would be a good thing for the individual Claimant.” Sanita Gillespie
“It was one of the premises of the Legal Services Act 2007 that ABSs would inevitably improve service to consumers of legal services and reduce the cost of those services, although there is no evidence of which I’m aware that this is likely to be the case. Reliance on technology will continue to be important both for ABSs and for traditional law firms, but technology alone should never be a substitute for a legal service provider’s duty of care to its client.” Ed Foulkes, Partner, Clarke Willmott LLP
ABSs will improve injured people’s access to justice.
With big brands now able to offer legal services as an ABS, there was a question mark over how effective this would be in improving access to justice. Were injured people now able to find legal representation more easily with high street businesses offering legal services? Interestingly only 16% of people surveyed agreed or strongly agreed that this would be the case.
“Local specialists within high street firms will be forced out of business. Will a call centre operation facilitate a solicitor visit for an elderly client to review their documents, policies and take instructions.” Craig Jenkins, Graham Evans & Partners LLP
“Claimants interests become secondary to profit margins.” Anonymous
ABS will benefit larger firms at the expense of smaller ones.
Among the first three ABSs announced by the SRA at the end of March 2012 was a ‘Goliath’ in Cooperative Legal Services and the ‘David’ a sole practitioner in Kent. The question remains over whether a move to an ABS will benefit the Goliaths over the Davids and three quarters of respondents agreed or strongly agreed that this would be the case with just one in ten taking the opposing view.
“Collaborative working arrangements for the smaller firms can prove beneficial.” Simon Oates (gocompensate.com)
“The days of the high street one-man-band are surely over!” Jon Williams“Larger firms who link with insurers or larger CMC’s undertaking volume work will [be] the only ones able to access clients and process the work at a profit.” Craig Jenkins, Graham Evans & Partners LLP
Claims management companies should be regulated by the SRA.
CMCs that become Alternative Business Structures will fall under the regulation of the SRA. So should all CMCs regardless of status, be regulated under the same rules as law firms and ABSs? Respondents appear to think so with two thirds of people agreeing or strongly agreeing with the statement. Only 3% strongly disagreed that CMCs should be regulated by the SRA.
“Level playing field. Same industry same work same rules should prevail.” Julian Oldfield, Bakers Solicitors
“There is a case for the regulation of claims management companies (not just in relation to PI claims but also in relation to other types of claim), but I’m not convinced the SRA is the most appropriate regulator for them.” Ed Foulkes, Partner, Clarke Willmott LLP
“I object to non-solicitor organisations being allowed under the solicitor umbrella but agree they should be much more rigorously regulated.” Anonymous
We’d love to hear your thoughts on the results, any questions, and feedback you may have in the comments section below.
If you’d like more information about the survey, please contact us here