Jack Straw Tackles Referral Fees

In an article for The Times, Jack Straw described the spiralling cost of insurance, which he says is caused by referral fees to personal injury lawyers, as a "racket". He goes on to say that insurance companies are complicit in this.

A root and branch review of legal costs was undertaken in January 2010 by Lord Justice Jackson. Since that time there has been uncertainty as to how the proposed reforms would be taken forward.

Since then Ken Clarke has announced in a little more detail which reforms are going to be implemented (see Costs Changes announced by Ken Clarke "Not revolutionary").

There can be no doubt that tackling referral fees will not be easy with a number of stakeholders across the industry having different views. However, "it is clearly an issue that needs to be looked at carefully as part of an holistic approach to reforms" says Kelvin Farmaner, Head of Insurance Litigation at Trethowans.

Mr Straw told the Today programme how his friend was "bombarded" by texts and phone calls urging him to claim compensation after an accident, despite having no injuries. Clearly, this is wrong and needs to be tackled but it raises wider issues than simply the banning of referral fees including the need to carefully regulate all those operating in the sector. "Implementation of an holistic package of reforms, rather than dealing with matters in a piecemeal way is key".