Personal injury law firms are continuing to pay referral fees for cases weeks after the ban came into force, a leading insurer has alleged.
David Fisher, claims technical manager for the UK’s fifth largest motor insurer AXA, told a parliamentary event that existing legislation is not enough to prevent non-compliance with the ban.
The payment of PI referral fees was prohibited last month as part of the government’s attempt to reduce the cost of civil litigation. There have been rumours since then that some firms are flouting the ban, but this is the first time those concerns have been expressed in a public forum.
Fisher told a session of the all-party parliamentary group on insurance and financial services that he was concerned the terms of the ban ‘do not go far enough’.
‘We see the same behaviours currently as previously,’ he said. ‘Some smaller law firms will ignore the referral fee ban as that is the only way they will continue to get work. That’s a concern.’
The Gazette was told by one consultant to personal injury firms that it is ‘inevitable’ some firms will continue paying referral fees. ‘There are inconsistencies in the wording that mean one firm will be hammered for it and another firm will get away with it,’ he added.
‘We ran a seminar three weeks after the ban came in and it was full, with people asking what was happening.’
The Solicitors Regulation Authority has been handed responsibility for policing the ban by the government.
It has told firms heavily reliant on PI referral fees to have continuity plans in place, while those which have not done so risk regulatory action.
An SRA spokesman said: ‘If firms are ignoring the referral fee ban, then evidence of their non-compliance will be picked up in our usual regulatory work, as is the case for any other breach of the code of conduct.
‘Penalties are therefore also the same as any other breach, and depending on the severity and impact of the breach, range from a rebuke up to a £2,000 fine. If a more severe penalty is deemed appropriate, cases could be referred to the SDT.’
He added that information will be shared with the Financial Conduct Authority, as the firms it regulates are also banned from receiving referral fees.