Solicitors have hit out at a report claiming the market in personal injury claims is failing because legal fees are out of control.

Arguing that fees could be reduced without restricting access to justice, a study commissioned by the Association of British Insurers (ABI) said there were insufficient market constraints, because the use of ‘no win, no fee’ agreements means clients have no role in influencing the level of solicitors’ costs.

Even when solicitors reduce their costs through efficiency, larger referral fees simply fill the gap, it said, with the average fee of £600 in 2007 now £1,000 in some cases.

The study by Oxera Consulting was motivated by the work of the Advisory Committee on Civil Costs. The committee is currently investigating the extent to which referral fees account for the 20-35% gap between the hourly rates charged by claimant and defendant solicitors, which it uncovered last year.

Oxera said marketing spend on PI claims as a proportion of base costs – 23-40% – was high when compared to other consumer and professional services.

Law Society chief executive Des Hudson said: ‘We are surprised the ABI is criticising the payment of referral fees in claimant work when their members regularly charge solicitors similar fees for cases.’

An ABI spokesman said charging referral fees is a commercial decision for individual insurers, but that the income would be reflected in lower premiums.

A spokeswoman for the Association of Personal Injury Lawyers said it was impossible to compare costs in the absence of information about defendant lawyers’ business models. ‘This is the research which is needed now, rather than a report which compares injured people with, among other things, cars, chocolate and toothpaste,’ she said.