Insurance companies are 'ripping off' consumers in a practice that sees solicitors forced to pay more than £100 million in 'sleazy kickbacks' for road traffic accident (RTA) work, a campaign launched last week has protested.

The Accident Relief Campaign (ARC) said 'rapacious' insurers are making a double profit by charging consumers to take out 'completely unnecessary' legal expenses insurance (LEI), and then charging solicitors hundreds of pounds in referral fees to buy the cases from them.


The campaign, run by the Motor Accident Relief Society, estimates that insurers make at least £270 million by charging for legal expenses insurance that is not needed because solicitors will undertake RTA cases on a no win, no fee basis.


The call echoes the vehement opposition to any expansion of LEI expressed by claimant lawyers at the Civil Justice Council's recent costs forum. The council had proposed greater use of insurance, but claimant lawyers savaged LEI for not being transparent. In effect, they said, consumers are paying to allow their insurers to sell their cases to solicitors for up to £700.


It was alleged that referral fees prop up the LEI market, while concern was expressed over other issues such as panel firms agreeing not to bill insurers and problems topping up cover once the LEI limit is reached.


Backing the ARC, leading personal injury lawyer Kerry Underwood, partner at Underwoods in Hemel Hempstead, called for insurers to be required to tell consumers the full facts when they sign up for LEI.


He said: 'With any RTA, any lawyer in the country will do it on a no win, no fee [basis] with no deductions from damages. Consumers are also being denied choice of solicitors, because they are pushed towards the panel firm. They are paying to be deprived of freedom of choice... It is not just getting the public to pay for something that's worthless, but paying to give up something that is of considerable value.'


ARC spokesman Nigel Mills said: 'In 2004, approximately 207,000 road accidents in Great Britain resulted in personal injury. Unknown to the victims, many insurance companies, claims management companies, and well-known motorists' organisations profit from these accidents by "selling" the associated legal fees to solicitors who, if they are unwilling to pay these sleazy kickbacks, simply do not get the legal work. The sum of money going into insurers' pockets from kickbacks is estimated conservatively at £100 million per annum.'


The ARC urged the Office of Fair Trading and the Financial Services Authority to investigate the 'claims roundabout' practice of charging unnecessary premiums and selling on cases.


A spokeswoman for the Association of Personal Injury Lawyers said it is 'crucial' that referral fees are 'totally transparent'.


The Law Society's Regulation Board will consider in June whether to review the position on referral fees.