The Ministry of Justice has proposed a new rule which will stop claims management companies offering a cash incentive to clients.
Lord Young published a report last October which said the growth of these companies has dramatically impacted the way people view the nature of personal injury compensation.
The compensation culture in Britain is encouraged by the media who report stories about people receiving massive recompense for personal injury claims and by continual adverts offering non-refundable inducements and handsome settlements if they lodge a claim, according to Young’s report.
This can place unnecessary pressure on businesses that fear personal injury at work litigation and have to pay increasingly large insurance premiums.
Current rules state that claims management companies are forbidden from offering immediate inducements but there is nothing to stop them offering some form of recompense at a later stage. Thus pledges like “we will reward you with £200 as soon as our personal injury solicitor approves your claim,” are currently permissible.
The MoJ believes incentives are offered by around 5% of authorised claims management firms. The Ministry published a consultation last month proposing to prevent any form of inducement being offered at any stage of the claims process.
If implemented, this should reduce the perception that England and Wales have a compensation culture whilst ensuring the regulatory regime achieves its overall purpose.
The consultation is open until 10th February and plans are to implement the new amendment this April.