Should Claims Management Companies and Insurers be barred from being an ABS ?

As I am Managing Partner of a specialist firm of personal injury solicitors, the title alone of this post may make me appear to be a bitter personal injury lawyer, but honestly, that’s not really the case. I’m all for a level playing field and competition is inherently a good thing in all aspects of life.

In many respects, lawyers have only themselves to blame as regards the fact that in many areas of law, we no longer call the shots.

In the personal injury sector, the warning signs started many years ago with Claims Direct. An ex-lawyer decided that, based on lawyers unwillingness to invest in marketing and/or the fact they were constrained on types of advertising, he would do the marketing for us, and would be kind enough to sell us all the leads he obtained for a hefty premium !

Too few lawyers recognised the clear signal from Claims Direct and acted accordingly. The threat did not just apply to personal injury but law generally and in fact, more injury lawyers started marketing than in other sectors of legal practice.

Post Claims Direct

Insurers realised they could make money from lawyers as well, so started selling claims and expecting hefty referral fees. Claims Management Companies were created by other entrepreneurs, realising that there is a funnel whereby in many cases, a vehicle accident repair company can gain the ear of an accident victim first. Once you have the ear of the person, you can then seek to act as a broker.

To that extent, whilst the rules on advertising were relaxed for lawyers, the Claims Management Companies were again ahead of the game, and many resorted to tactics such as data marketing and mass text messaging which were still, thankfully, unavailable to lawyers who wanted to stay lawyers.

So, as can be seen from the above, lawyers are partly responsible for the fact they do not control the market, except perhaps for the very niche area of clinical negligence claims, but partly, those who acts as brokers for claims have exploited the regulation of lawyers so that there has never been a level playing field.

Referral fees banned – lawyers free to compete with each other without outside interference

With referral fees now being banned from next year, on the face of it, this would give injury lawyers an opportunity, for the first time since Claims Direct, to invest in marketing on the basis of a more level playing field, competing only with each other ?

Unfortunately not   – the referral fee ban coincides with the new ABS system which enables non-lawyers to effectively buy and control law firms. So what happens next ? Insurers and claims management companies start buying law firms, using the financial muscle obtained by using methods unavailable to lawyers to outflank and outmuscle remaining independent law firms.

Frankly, I don’t think this is fair – I am all for a level playing field and competiotion in law, but the system is now stacked against lawyers.

If the root cause of the disquiet about personal injury is the sort of tactics utilised by marketing and selling in a way which discredits genuine lawyers, should it not be the case that the root of the problem, which is not generally law firms, are removed from the equation ?

What do you say ?