Feeds

Min of Justice to crack down on dodgy compo claims

'Incentives to sue' to be banned

  • alert
  • submit to reddit

The Essential Guide to IT Transformation

Claims management companies will be prevented from offering clients cash incentives to bring damages claims if a Ministry of Justice (MoJ) proposal to tighten up the rules comes into effect.

The move has been prompted by concerns about the way such companies market their services to the public. In his October 2010 report Common Sense – Common Safety, Lord Young of Graffham said that the growth of claims managements companies "has had a dramatic impact on the way we perceive the nature of compensation".

"Britain’s 'compensation culture' is fuelled by media stories about individuals receiving large compensation payouts for personal injury claims and by constant adverts in the media offering people non-refundable inducements and the promise of a handsome settlement if they claim," the report states.

"It places an unnecessary strain on businesses of all sizes, who fear litigation and are subjected to increasingly expensive insurance premiums," it said.

Conduct rules governing authorised claims management companies state that, when advertising their services, they must not "offer an immediate cash payment or a similar benefit as an inducement for making a claim". But this does not prevent them offering to pay something at a later stage.

As a result, promises such as "We'll pay you £200 immediately after our solicitors approve your claim," or "If the solicitor believes they can win the case for you and accepts it, we will award you £300 as an up-front payment" are allowable under the current rules.

In some cases, the inducement takes a different form, such a shopping voucher or entry into a prize draw if the claim is taken on by a solicitor.

The Ministry of Justice (MoJ) estimates that about 5 per cent of authorised claims management companies offer such incentives. In a consultation paper published on 23rd December, it proposes to tighten up the Conduct of Authorised Persons Rules to prevent "any cash payments or similar benefits" being offered - at any stage - as an inducement to make a claim.

"The overall benefits would be a reduction in the perceived compensation culture within England and Wales in addition to strengthening the regulatory regime ensuring that it achieves, more directly, its intended overall purpose," the consultation paper states.

"Additionally, as businesses may need to adapt their marketing accordingly this would go some to way to improve the overall quality and content of advertising and marketing in the industry".

The consultation closes on 10 February. The MoJ plans to implement the amended rule in April 2011. It says subsequent changes to regulations on advertising and conduct of claims may result from its further review of the conduct rules.

The MoJ is also currently consulting on implementing key proposals for the reform of civil litigation funding made by Lord Justice Jackson in his January 2010 report – recommendations which were supported by Lord Young in Common Sense – Common Safety.

The proposals include radical changes to conditional fee arrangements so that a successful claimant would not be able to recover his lawyer's success fee or the ATE insurance premium from the defendant, thus giving claimants a financial stake in keeping legal costs down.

Copyright © 2010, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

Boost IT visibility and business value

More from The Register

next story
Just TWO climate committee MPs contradict IPCC: The two with SCIENCE degrees
'Greenhouse effect is real, but as for the rest of it ...'
Adam Afriyie MP: Smart meters are NOT so smart
Mega-costly gas 'n' 'leccy totting-up tech not worth it - Tory MP
'Blow it up': Plods pop round for chat with Commonwealth Games tweeter
You'd better not be talking about the council's housing plans
Arrr: Freetard-bothering Digital Economy Act tied up, thrown in the hold
Ministry of Fun confirms: Yes, we're busy doing nothing
ONE EMAIL costs mining company $300 MEEELION
Environmental activist walks free after hoax sent share price over a cliff
Help yourself to anyone's photos FOR FREE, suggests UK.gov
Copyright law reforms will keep m'learned friends busy
Apple smacked with privacy sueball over Location Services
Class action launched on behalf of 100 million iPhone owners
UK government officially adopts Open Document Format
Microsoft insurgency fails, earns snarky remark from UK digital services head
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.