REPORT: 'third-party capture' schemes run by insurers also increasingly prominent


The ethical issues around outsourcing and off-shoring of client-related work are becoming more prominent and are likely to be of rising concern, the chief executive of the Law Society Regulation Board has warned in a report to its October meeting.



Antony Townsend's comments were prompted by the growing trend among law firms of all sizes to outsource or even to place off-shore smaller transactions and routine business processes.



The cost benefits of these arrangements are attractive to firms looking to improve profitability. The challenge for the profession in setting them up is to protect client confidentiality, maintain rigorous quality controls, and ensure transparency and accountability.



Outsourcing and off-shoring were two of several areas of increasing concern Mr Townsend identified - the others were solicitors' relationships with will-writing companies, exercising intervention powers in respect of solicitors practising outside England and Wales, and 'third-party capture' schemes run by insurers.



Third-party capture is where an insurer handles claims for individuals who have been in an accident with its own policy-holders, directing them to a panel of solicitors. The Association of Personal Injury Lawyers has previously warned of the potential for conflict of interest and the danger of consumers receiving poor service.



Last week, it emerged that liability insurers operating such schemes would be regulated by the Financial Services Authority and not the government's incoming head of claims management regulation, Mark Boleat (see [2006] Gazette, 26 October, 1).



Figures released at the October meeting showed that solicitors are seeking help in increasing numbers, with calls to the ethics guidance team in the first six months of 2006 totalling 33,231, compared to 30,224 for the same period in 2005. However, this 10% increase should be seen in the context of a reduction in calls for September 2006 (5,581) compared to September 2005 (5,819).



This reduction, Mr Townsend said, was largely thanks to the board posting extensive guidance on the Web.



Jonathan Rayner