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Insurance Rip Offs To Continue

John Hyde writes:

"Claims management companies have already agreed pre-contract deals with law firms to become alternative business structures (ABSs), according to their governing body.

"Darren Werth, chairman of the Claims Standards Council, said he was aware of a number of pre-contract agreements for the creation of ABSs in the new year.

"The claims management companies would effectively become the advertising wing of the law firm, a move which may get round the Ministry of Justice’s forthcoming ban on referral fees in personal injury cases.

"Last month, car accident claims manager Vamco indicated it was looking to invest in a law firm, a trend likely to be accelerated by the ban.

"It had been hoped within the industry that mergers could start from the Legal Services Act coming into force on 6 October, but talks are now on hold until the Solicitors Regulation Authority is granted a licence to authorise ABSs.

"Werth said: ‘Across the industry you have companies that have expressed an interest in taking firms in-house.

"‘It is an exciting option to bring the law firm in-house - you can provide a day-to-day service and start with a blank sheet of paper. There are a number of people who have pre-contracts and are waiting for when the time is right.’

"The idea of amalgamating claims management companies and law firms was last week welcomed by justice minister Jonathan Djanogly when he spoke at a House of Commons transport committee hearing on the cost of motor insurance.

"Djanogly said the mergers would bring CMCs, currently regulated by the MoJ, under the scope of the SRA and provide greater protection for the consumer.

"On the referral fee ban, Djanogly noted it would be difficult to make referral fee payment a criminal offence because it would be almost impossible to prove in court.

"The Claims Standards Council is calling for the government to state its definition of a referral fee and give the industry more clarity about how and when the ban would be enforced."

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