Straw calls for 50% cut in personal injury solicitors’ fees

Jack Straw, the former Home Secretary, wants to see the government cut in half the amount of money personal injury solicitors receive when they administer motor insurance injury claims.

On Tuesday, he told the Parliamentary Transport Committee that the system is burdened down with unnecessary costs. If personal injury lawyers were to receive £600, instead of the current £1,200 per claim, it would reduce the “fat” which has caused insurance premiums to increase to record levels.

Brokers, insurance companies and claims management firms are all blamed for selling customers’ data to no-win, no-fee lawyers, who then lodge personal injury claims against rival insurers. The number of road traffic accidents has dropped and yet the number of claims keeps on rising and that is driving up the cost of car insurance.

Jonathan Djanogly, the Justice Minister, announced last month that referral fees will be banned but Straw wants him to go further and reduce the amount of profit lawyers make.

Last year, claims management firms, insurers and lawyers launched the RTA Portal system to aid in the processing of personal injury compensation cases. But Straw says the £1,200 payment to lawyers fuels spurious claims. In Germany for example, lawyers receive just 300 Euros per case, according to the ABI.

In fact the ABI says the current UK claims system is dysfunctional because it allows insurers to fuel the compensation culture. Insurers and brokers get around £800 for each customer they refer allowing them to profit by about £320 million over the past 12 months.

The ABI also points out that insurance companies paid out £10.3 billion on claims last year, an increase of 28%. At the same time, the number of RTAs fell by 18% in the four years to 2010. As a direct result, the cost of comprehensive motor insurance policies has risen by 40% to around £900.

 

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