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Can SRA put breaks on insurance giant’s plans to form ABS?

August 13, 2013

So, in April this year, referral fees for personal injury claims were banned; more about how that law has been handled (badly) in practicality on Friday.

Today, our article looks at:

  • Alternative Business Structures
  • how insurance companies have been toying with personal injury solicitors’ practices since small claims fees were capped
  • the negative impact the resultant outcome could be for the legal industry if insurers were to take command of injury claims as both insurer and solicitor

This isn’t just a sour grapes moan about heightened competition

Insurance companies reading this article will point the finger saying that personal injury solicitors are kicking up a fuss about having to share the market already, before wide spread ABSs have become the norm.

On the face of it, you’d maybe agree. But when you consider that an insurance firm could hog the whole injury claim process, with one arm being the prosecutor and the other the defendant, where does justice fit into that conundrum?

It’s almost as if the insurance sector has looked for – and found – another way of making money from the inevitable claims that follow an RTA when evidence is stacked in such a way that any personal injury lawyer worth his salt is odds-on to come up trumps.

Direct Line Group has already applied for ABS status

The formation of ABSs has, as we’ve mentioned recently, been apparent to the legal profession for some time.

However, it’s only in light of such a domineering force in motor insurance as Direct Line having applied to the SRA to form an ABS that the potential consequences to the legal sector as a whole are becoming apparent.

If this type of practise becomes a mainstream injury claim channel, yes, of course it will have an affect on dedicated personal injury lawyers’ practises.

But more importantly, the accident victim is in grave danger of becoming little more than a pawn in a tax-saving exercise with the only winner being the company or group that employs both the insurer and the prosecuting injury lawyer.

Not-for-profit ABSs have done good; will DLG Legal do likewise?

As the application by Direct Line Group to become DLG Legal Services is just that, an application, this is still hypothetical supposition, at least in this isolated instance.

Additionally, it’s worth going on record as stating that not-for-profit ABSs have provided genuinely good legal aid since victims were somewhat abandoned by the Government with the introduction of LASPO in Spring last year.

We’re not saying that DLG Legal won’t provide as sterling a service as the non-profits are doing right now. They might. But if you consider that the shareholders are stakeholders in both businesses, they might not, either.

Can the SRA really grant such models license to practise when so many accident victims will potentially pass through a channel where the active parties are both for and against each other in a bizarre seesaw of insurer and solicitor?

You’ll be telling us next that some personal injury solicitors have ignored the ban on referral fees…
…more about that on Friday. See you then.