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SRA accuses insurers of using Alternative Business Structures to protect income from referral fees

Richard Collins, Executive Director of SRA

The SRA has accused the insurance industry of using ABSs to protect the income they made from the referral fee system they fought so hard to get banned.

Speaking at the Legal Futures’ Personal Injury Futures event, held in Manchester, the SRA’s executive director Richard Collins discussed how the SRA had rejected several ABS proposals, whose only purpose was to circumvent the referral fee ban and alleged that insurers were at the heart of this.

He told those attending: “We have had some pretty odd models suggested, none of which we’ve licensed, with various tiers of ownership of shares, quite clearly no joint ownership, not profit taking, but (there are) payments to the 0.2% category C shareholder based directly on the number of cases taken up but the joint venture.

“Having brought about the ban because referrals are an awful thing, (insurers) have obviously sought to make sure their income streams from it are protected.”

Referral fees were banned earlier this year; after the insurance industry lobbied that they were encouraging fraudulent claims and therefore causing motor insurance premiums to rise as a result of insurance companies being forced to payout out on an increasing amount of cases, which small claim types such as whiplash being targeted as the problem.

This has since been disproved as nonsense by government figures that revealed that the amount of claims for whiplash had indeed dropped over the past 3 years and that the insurance had used out of date figures to pursue the banning of referral fees as well as cuts to legal aid.

Mr Collins also responded to criticism the SRA had received in parliament in June that the referral fee ban was being flouted and was not changing the market saying: “It’s not our role to drive through the spirit of the government’s policy. It’s our role to regulate firms who are authorised by us and ensure they are compliant with the requirements upon them.”

Image source(s)

1. SRA; https://www.sra.org.uk/sra/equality-diversity/newsletter/december-2014.page

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