Regulators are demanding that over a dozen firms involved in the burgeoning and highly lucrative holiday sickness claims sector prove they are not paying illicit fees for referrals.
The government is understood to be concerned that claims management companies (CMCs) see the cases as a partial saviour if whiplash claims are further restricted. The Solicitors Regulation Authority has contacted practices running the claims asking to see how claims were sourced, how many have been settled and what fees were received.
Solicitors are being told that the investigation is necessary to rule out misconduct.
The regulator wants to see copies of all written referral agreements or fee-sharing arrangements between the firm and any CMCs.
Payment or receipt of referral fees has been banned for personal injury claims since 2013.
The SRA also wants copies of letter templates used by firms when dealing with gastric illness claims, as well as numbers of referrals in the past two years. A spokesperson said: ‘We are looking into reports about the conduct of solicitor firms involved in compensation claims for holidaymakers who have suffered sickness while away. There have been 16 reports made to us so far.
‘We will feed our findings on this into guidance for firms to make sure they are aware of their obligations when undertaking this type of work.’
The Gazette also understands firms have complained that travel operators have approached them directly with attempts to ‘scare off’ further involvement in the sector.
One risk adviser, who did not want to be named, said: ‘It should not be for travel companies to try and fend off potential claims by approaching law firms direct and making veiled threats in letters initially originating from their customer services departments.’
The travel sector has called for reform of civil procedure rules to impose fixed recoverable costs on holiday sickness claims valued at less than £25,000. Alan Wardle, director of public affairs for the Association of British Travel Agents, said the rise in claims for holiday sickness ‘far exceeds’ recorded incidents.
Alan Wardle, direct of public affairs for the Association of British Travel Agents, said the recent increase in claims for holiday sickness ‘far exceeds’ recorded incidents of illness in resorts.
‘It is apparent to us that the unscrupulous activities of some claims management companies is playing a part in driving this increase,’ he added.
Defendant law firm BLM warned in December that the increase in claims could threaten the entire travel industry if left unchecked.
Sarah Hill, head of fraud, said: ‘The industry needs to come together with government to develop a solution to this issue. It needs addressing in the same way whiplash claims were, with regulation that drives rogue CMCs out of the market.’