Referral fee are incurred when a no-win, no-fee claim is shared among lawyers, claims management firms, insurance companies etc. UK government said that, payment of referral fee in case of personal injury will be banned in order to curb the compensation problem and rising insurance costs.
Justice Minister Jonathan Djanogly of UK said that, “no-win, no-fee claim system is pushing us into compensation culture”. Here the middle men are making profit which the rest of the people are end up paying high insurance premiums at high prices. This announcement is revealed after the consumer watchdog observed the UK drivers facing average insurance premium increasing up to 40 percent in a year. This is because of the increasing costs of more and more compensation claims in the country.
The Office of Fair Trading (OFT), has issued a call for evidence saying that, hundreds of pounds are paid to lawyers (if they are successful), as they can claim the cost of referral fee back from the defendant or their insurance company. But many of the claims are false and fake, and not being made what it purports to be and sometimes happens because the current system encouraging too many people to make profit from minor accidents and incidents.
Finally, the Director General of Association of British Insurers (ABI) said that, “We are very pleased that the government has listened to the insurance industry’s campaign for a ban on referral fees feeding compensation culture”. They felt it is absolutely right to ban them and OFT said it will identify the number of aspects of the motor insurance market that is raising competition or consumer issues.