How the profession can meet the competition from companies dealing with personal injury claims

Law Society of Scotland President Alastair Thornton is pursuing his call to Justice Minister Jim Wallace to investigate the practices of personal injury claims operators amid mounting concerns of many in the profession that some of these organisations are effectively operating as unqualified legal services providers.

As yet there has been no indication that the Executive will initiate an inquiry similar to that conducted recently by the Lord Chancellor’s department in England and Wales which concluded that while the time was not right to recommend legislation to regulate these activities, the Law Society of England and Wales should give consideration as to whether any of its Practice Rules require amendment to enable solicitors to compete on a level playing field with their rivals in the field of personal injury.

In September’s Journal Alastair Thornton wrote: “Many of you feel that competition by certain claims compensation companies is unfair because unlike solicitors they are not governed by any regulatory framework.

“In particular the quality of the service they provide to their customers is not subject to scrutiny by any sort of governing body. In addition the staff of claims companies have not had to go through a lengthy and expensive qualification process. They do not have fairly substantial costs to meet, as solicitors do, just to carry on their business. As a result they are able to devote a much larger proportion of their turnover to marketing their services to the public.”

The most significant market penetration has been achieved by Claims Direct whose high profile advertising helped them acquire an estimated 6,000 to 8,000 cases in Scotland last year.

Responding to Alastair Thornton’s comments, Claims Direct Chief Executive Colin Poole, in a letter to Business AM last month, wrote: “We do not purport to give any legal advice to potential claimants. It is a fact that the vast majority of people in this country, who have the right to bring a claim for compensation as a result of being hurt by the act or neglect of someone else, fail to do so.

“Our market research tells us that the reasons that the public fail to make claims are that they are either unaware of their right to bring a claim, or they are afraid of the costs of bringing such a claim, or that they do not see solicitors as approachable, or are concerned about the amount of time and effort it will take to get their claim through the legal system. Our company is set up to address those issues.”

Personal injury claims specialist Ronnie Conway, of Bonnar & Co in Airdrie, who chairs the Society’s speculative actions working party, says clients should be wary of the sort of services offered by Claims Direct. He said: “Contingency fee companies have presented a challenge to the Society and the challenge is to educate the public that the first port of call should be a solicitor.

“Companies like Claims Direct have successfully presented themselves as providing a compensation and litigation service where in fact they are only a claims introduction service for which the client is paying an exorbitant premium.

“Some aspects of their operation throw down the gauntlet to us as a profession to take up the way in which approaching a solicitor and dealing with a claims process can be made more user friendly, but neither we nor the public have a need for Claims Direct.”

David Lyons, Convener of the Society’s Judicial Procedure Committee, also has concerns. “Solicitors are now being expected to compete with unqualified claims handlers who are not regulated. Clearly it’s not a level playing field. The public has certain protection because we are regulated but no such protection exists for the clients of claims handlers.”

Motor accident claims specialist Euan Campbell of Glasgow solicitors Buchanan Campbell, goes further. “Any solicitor advising clients to get involved in a case is not acting in the best interests of their clients if they do not inform them of cheaper alternatives such as Compensure. The Claims Direct contract includes a clause which allows the client to withdraw if the panel solicitor advises him that it is not in his best interests to proceed. This is simply not happening on the basis that those who accept those referrals would cease to obtain further cases if they did so.”

Campbell introduced a topic of discussion at last year’s Law Society of Scotland AGM at which he called for regulations “to firmly place an onus on solicitors instructed by such companies to provide documentary evidence, if required to do so, that innocent victims have been properly and fully advised of alternative cheaper methods of funding”. (see panel)

“As a profession it is our duty to educate people that they can approach solicitors without fear of prohibitive costs. We’re not getting across to the public that solicitors normally recover the costs from the third party insurer over and above the principal sum, and don’t take a chunk of the sum awarded as is commonplace in American litigation.”

Graeme Garrett, partner in personal injury claims specialists Digby Brown, views things differently. His firm is one of Claims Direct’s most frequently used panel solicitors in Scotland. “There is a sharp distinction between claims companies who handle the business themselves and those that are acting as referral agencies. The legal profession is right to have genuine concerns where those handling claims themselves are not equipped to do so, and in those instances some regulatory regime may be required introducing a vetting procedure.

“Claims Direct don’t fall into that category, nor do National Accident Helpline, they only act as a fact finding agency, seeing the victims and gathering the facts for panel solicitors to proceed with the case, in effect making it an effortless procedure for the client.

“Claims Direct have identified an untapped market, their clients are usually people who have made no attempt to see a solicitor during the time since their accident. They aren’t taking business from the mouths of solicitors, certainly not to the extent that some critics would suggest.

“Where Claims Direct have been clever is to by-pass the legal profession and tap into the doubts people have about approaching a solicitor.”

He refutes suggestions that the Society’s Compensure scheme, whereby for £115 claimants in no win no fee actions can buy an insurance policy to cover liability for expenses and be referred to a personal injury solicitor, has suffered in competition with claims handlers.

“Compensure is very useful, over 3,000 policies have been issued to date, but it is relevant to a different market, where people realise they have a claim early on and are seeking high value compensation. The legal profession are still getting these cases; claims companies operate in a different, lower value market.”

If the legal profession is right to have legitimate concerns about the operations of some claims companies, it may be that in the wider picture the profession needs to re-examine how it markets itself. There can be little doubt that to date the marketing battle with Claims Direct has been lost. Indeed as Ronnie Conway notes, it’s a battle the profession has never really entered. Conway will head the Compensure Working Party whose remit will be to actively look at marketing Compensure and set the profession on a path to reclaiming some of its lost territory.

While companies handling personal injury claims have undoubtedly served a useful purpose in promoting the rights of accident victims the debate as to who is best placed to handle claims on behalf of accident victims looks set to run for the foreseeable future.

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