Making the customer service case for referral fees

There can be no doubt that referral fees have proved to be a good way of generating revenue opportunities for both insurers and accident management companies. But according to David Green, chief executive of MTA Solicitors, whilst referral fees may have initially tempted some to generate more claims to sell, law firms are acutely aware of the rules that surround them and this has minimised bad practices. The introduction of referral fees has generated high levels of competition, with solicitors competing for market share as economies of scale increase the profit position. For Mr. Green, the real questions to address are: has the consumer been adversely affected by law firms having to pay referral fees; and can firms maintain the fees at the current levels?

Referral fees were made legal in early 2004 following extensive consideration by the Law Society. The capture and referral of claims by insurance and accident management companies has long been in existence and was not a new concept following the revision of the rules by the Law Society. The decision to ‘legalise’ the payment of such fees has necessitated formal regulation and control alongside attaching a value to personal injury (PI) claims from which a referring business can legitimately collect referral fees.