Personal injury firms gear up for industry changes

Published: 30/03/2013

On 1st April 2013, the personal injury industry will undergo the first set of changes as the government attempts to stop fraudulent accident claims and reduce insurance premiums.

From the first of April:

• Referral fees will be banned
  This means it will be a regulatory offence to pay or receive referral fees for personal injury cases e.g. a claims management company (CMCs) will not be able to receive any kind of payment for sending accident claims to a qualified solicitor.
• The Small Claims Limit (non PI) will increase from £5,000 to £10,000
  Non-PI Small Claims include such claims as hire charges or repair costs or indeed any other fixed losses. From the 1st of April, any claims valued at under £10,000 will not attract legal costs. This means a personal injury solicitor helping a client recover these costs would not receive payment for this service.
• There will be rule changes to Conditional Fee Agreements (CFAs)
  From 1st April the success fee can no longer be recovered from the defendant. Instead a maximum of 25% can be taken from the client’s damages.
• Damage based agreements (DBAs) can be entered into
  A DBA is an agreement with the client that can be entered into by a Solicitor or Claims Management Company which allows for a deduction of up to 25% from the client's damages towards costs. Given the changes to CFAs many solicitors may have to enter into DBAs with clients in order to cover their own costs.

Now in black and white it is understandable why personal injury solicitors are so concerned about these imminent changes. Not only is there significant financial implication on firms –there are fears up to 100,000 jobs could be axed – clients could end up footing some of the bill.

While we are in full support of extinguishing fraudulent claims from the personal injury industry, it has always been our concern that genuine accident victims will be deterred from making a claim under the new laws. Now where’s the justice in that?

Content correct at time of publication