Finding the silver lining in cuts to low value RTA claims

A growing number of commentators are predicting the death of the high street law firm as a result of the threat from ABSs. It may seem strange therefore to predict that the government's proposals for slashing the fees recoverable in low value RTA claims may come to the rescue.

The government has proposed reducing the fees recoverable for claims in the RTA Portal from £1,200 to £500. The reasoning behind this reduction is that firms currently pay referral fees of approximately £700 per case. Come April 2013 the payment of referral fees will be banned and the government therefore concludes that the level of recoverable costs can be reduced with no corresponding loss of profit. Critics of this analysis argue firstly that not all firms pay referral fees and that, in any event, there is an inherent cost to acquiring these claims, whether by referral fee or by direct marketing. Recent research commissioned by the Association of Personal Injury Lawyers (APIL) shows that the average acquisition cost per case is not that dissimilar for firms that do not pay referral fees.

The mass marketing of personal injury claims, through saturation daytime television advertisements, text messaging, cold calling, etc, is a relatively recent phenomenon. Prior to this there were still personal injury claims and personal injury lawyers. It is no doubt true that the mass marketing of this work has coincided with a significant increase in the number of claims being brought but, even if all marketing activity stopped tomorrow, there would still be personal injury work. Indeed, the last decade or so has seen what is almost certainly the most expensive, and probably effective, public awareness campaign in British history through the activities of claims management companies and law firms. There can be few who do not now know that 'where there's blame, there's a claim'. That public awareness would not disappear overnight.

Taking advantage

Although, to an extent, raising public awareness of legal rights, in large part the mass marketing of these claims and payment of significant referral fees has simply been a very expensive way to divert this work towards certain firms rather than others.

If the RTA Portal fees are reduced to £500 there is little doubt that there is no room in that figure for funding expensive marketing campaigns or paying referral fees. It must be assumed that the former will end together with the payment of, what will be, the unlawful latter. Nevertheless, there will still be accidents. There will still be injured people looking for lawyers to represent them.

If injured members of the public are not funnelled in the direction of certain law firms as a result of expensive marketing campaigns or the payment of referral fees how will they find a lawyer to act? The likely answer is that they will go to their local high street law firm or undertake an internet search for their nearest lawyer.

This may represent a surprising glimmer of hope for the traditional high street practice. It is rather less good news if you work in a large personal injury department dependent on a regular flow of work through marketing or referral fees.