The Association of Personal Injury Lawyers (APIL) and The Motor Accident Solicitors Society (MASS) launched a Judicial Review last Friday afternoon of the Government’s proposal to cut fixed fees in the RTA portal from £1200 to £500.
The Ministry of Justice announced in November last year of its intention to reduce the fixed fee recoverable costs for RTA claims under £10,000. The reduction is due to come into force starting from April 1st 2013.
Ever since the decision, the personal injury industry has requested information on how the new figures have been calculated, especially considering the current figures were set little more than two years ago.
The MOJ has yet to give any clear guidance on how it reached the figure. One theory is that the Government has been heavily influenced by the insurance industry’s belief that the impending banning of referral fees as part of the Jackson Reforms will reduce the costs for lawyer to acquire cases. It may be more than a coincidence that the industry average figure for a referral is £700, the same amount of the proposed drop.
the government’s proposal to make these cuts is both unfair and based on a misinterpretation of the facts.
APIL and MASS released a joint statement on Friday outlining their concerns. “Fees in the current scheme were not calculated on the basis of referral fees. So, by consulting only with insurers, the government’s proposal to make these cuts is both unfair and based on a misinterpretation of the facts.”
“We also challenge the fact that the government appears to have accepted the insurance industry’s analysis that, if referral fees are banned, solicitors will make an unacceptable level of profit from cases run through the scheme.”
APIL’s own report on how personal injury solicitors acquire cases suggested that over 50% of firms do not pay referral fees, but do spend an average of £500 on marketing and other activities per case. It seems there has been no budgeting for any marketing activities for firms in the new fee proposals, completely removing the solicitor from the ability to meet the client.
Victims will find it difficult to obtain independent legal advice and will in turn be forced to negotiate with insurers.
The two organisations said the judicial review was needed because the proposed cuts will make running cases through the Portal unaffordable, making it more difficult for victims to obtain independent legal advice.
“Victims will find it difficult to obtain independent legal advice and will in turn be forced to negotiate with insurers for the compensation they need. With the vast majority of injured people having no knowledge of what their injuries are ‘worth’ in terms of damages, such negotiations will be biased in favour of the insurers and their shareholders.”
96% of those surveyed by Bott and Co at the end of last year thought the reduction in portal fees was excessive and 94% believed it would lead to a reduction in access to justice. Some firms suggested they may leave the sector of the industry all together, while 96% said they would find it difficult to operate.
In response to the judicial review, a MOJ spokesman said “We have consulted on changes intended to ensure claims are handled quickly and efficiently and accident victims with genuine cases can be compensated as soon as possible.
“These changes, along with our wider reforms, are intended to bring more balance to the system, make lawyers’ costs proportionate and in turn create an environment where insurers can pass on savings to their customers through lower premiums. We will publish our response to the consultation in due course.”
It will be interesting to see how the review turns out, interesting to see what happens on 1st April, and it will be interesting to see how the numbers pan out.