Jack Straw, sometime Justice Secretary, is on a campaign against referral fees in accident insurance claims. Claims management companies (CMCs) busily ferret out details of accidents that people have suffered, and sell on the details to solicitors who will encourage the victims to sue, on a no-win-no-fee basis. Mr Straw and many like him claim this pushes up legal costs that will eventually have to be paid by insured people generally. Furthermore, it encourages that wicked thing, the ‘compensation culture’, the habit of demanding that someone be to blame for every misfortune we suffer and should pay up accordingly. Mr Straw says referral fees are:
a lucrative and self-serving merry-go-round in which the personal information of anyone involved in any collision with another vehicle, no matter how trivial its effects, is traded like a commodity, typically for £600 to £800 a shot, with the aim of pursuing a claim – any claim – provided that it brings rich rewards to all those involved in this industry.
He reckons that whiplash injuries claimed by car occupants after being shunted from behind are largely fictitious – it seems they’re difficult to diagnose, so such claims are hard to refute.
In fact, one Dr Simon Margolis, CEO of something called the Premex Group, while trying to counter Straw, ends up by making him seem more credible:
There is no blood test or imaging modality currently in existence that can prove or disprove an injury was sustained or whether symptoms are being experienced. That is why a combination of the taking of a history and the laying on of hands during clinical examination by a medical expert remains the appropriate approach. Much can be learned from the general demeanour of the claimant and the way the history is delivered.
“The laying on of hands”! I love that. Much can be learned from the general demeanour of industry apologists.
Straw’s beef seems to be another instance of the ancient complaint against middlemen in general: people can’t see what service they provide and think they just push up prices. I compare the referral-fee example with the old complaint against advertising: when I buy a can of beans I have to pay the costs of the advertising that persuaded me to buy it. Outrageous!
The same answer applies to both cases, I suppose: in claims management, the middlemen actually reduce costs and push up the effectiveness of the whole system by matching up buyers and sellers, and encouraging buyers (accident victims) to buy (sue). If CMCs are squashed, lawyers will have to do the job themselves, or use other means to attract custom.
Jack Straw’s proposals are bound to make the whole process of getting justice less efficient – if that’s imaginable. But his private member’s bill has been read in the Commons without opposition, regrettably.
To bring legal costs down we need the process of linking up providers and consumers to be untrammelled. We also need police, judges and lawyers who do their jobs efficiently. Fat chance of that in the oldest of nationalized industries.
Maybe whiplash injury claims are largely a scam. I’d rather leave it to the people with a direct financial interest in showing this – namely, the insurers – to sort that out, rather than to the medical expertise of Jack Straw.
A lot of people are sceptical about whether no-win-no-fee improves the quality of justice. It may not be the whole answer, but it’s certainly part of the answer. If I ever found myself inside an ambulance I would want to see an ambulance-chasing lawyer hard on its heels. And I’d want some clever type in a sharp suit to introduce us.