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Client Inducements: A Balanced View

July 3, 2013

There has in the past week or so been a degree of negative publicity within the legal press regarding what some are describing as the use of financial “inducements” by law firms advertising for personal injury claims.

A number of “prominent” figures within the legal industry, including the head of MASS and a Director of a long standing Nationwide claims acquisition company, have launched scathing attacks on firms offering marketing incentives, eg. cash advances and “gifts” to potential clients.

The attacks come off the back of the recent publication of the SRA Guidance Notes on “inducements” in which the regulatory body governing solicitors in England & Wales confirmed that such marketing strategies would not be outlawed.

The SRA were keen to highlight that they had looked at banning inducements in line with the MOJ’s decision to ban claims management companies advertising such incentives, but had “not found anything to suggest that it is a significant problem or that clients’ interests are put at risk”. Furthermore, they state that they “have no evidence which suggests that inducements encourage spurious claims to be made”.

Despite the SRA’s reasoned findings, both MASS and APIL,both of whom Lamb & Co are affiliated with, have criticised the use of inducements as an “incentive to produce spurious claims”, even describing the practice as “dubious” and “partly responsible for bringing our industry into disrepute”.

Our own take upon this is that such emotive comments are ill-founded and largely unhelpful. We would ask the simple question as to what fact-based evidence they possess to back up their assertions that they promote fraud and diminish the profession in the eyes of the consumer.

Lamb & Co have been offering this service to our clients for six years without question until recent weeks. The standard of service provided by Lamb & Co to our clients is unparalleled and can be evidenced by a wealth of positive client testimonials, an unblemished indemnity history, and an excellent complaints record all of which are testament to how the Firm is run for the benefit of whom we are instructed.

We would also welcome a rational and sensible debate on the nature of such marketing tools and their place within the personal injury industry.

We would add that we vet potential claims to the highest standard and wholeheartedly agree that the industry should stand united in discouraging fraudulent claims, but from our own experience have found that the vast majority of questionable claims have historically been referred to us by claims management companies, one of the reasons why Lamb & Co had stopped taking referrals from claims management companies for a significant period even prior to the implementation of the referral fee ban on 1 April 2013.

Lamb & Co does not pay third party companies for any “recommendations” or other provision of client leads under any guise. All clients are fully aware of all terms and conditions and are happy for their case to be progresses on this basis if they do wish to take advantage of the offer available to them.

Furthermore, we firmly believe that it is not these types of inducements which materially contribute to insurance fraud, but the poorly regulated claims management companies providing solicitors with “leads” in return for financial recompense.

We had hoped that the recent referral fee ban would have discouraged nefarious third party companies, motivated by financial gain, in providing firms with high volume leads. Sadly, the industry has once again sought to circumvent the ban and enter into strategies which flout the spirit of the legislation and obviate the ban, rendering it fundamentally worthless. It is noteworthy that members of the House of Lords have recently discussed such ‘schemes’ which are in operation between law firms and claims companies and will seek to revise their powers under the Legislation if the flouting of the intention of Parliament continues to be an issue. It is hoped that this revision occurs sooner rather than later.

We would suggest all claimants do their homework before choosing which firm to engage with in the provision of legal services, and would encourage all potential clients to choose wisely, with reference to their ability to do the job properly and efficiently, regardless of any inducements offered.