How to cash in on the referral fee ban

In April next year, the legal sector will face another huge shake up as the ban on personal injury referrals comes into force. According to the Solicitors Regulation Authority (SRA) personal injury work is worth an estimated £1.8bn per annum to ?the UK legal sector.

A quarter of all solicitor firms in England and Wales carry out personal injury work, which in 2011 accounted for 7 per cent of the total estimated market value.
The Law Society of England and Wales’ most recent annual report lists general personal injury work as among the most competitive areas (by number of solicitors practicing in that field) alongside traditional practice areas such as conveyancing, crime and wills and probate.

What differentiates personal injury from these other sectors is the existence of claims management companies (CMCs). Such companies have demonstrated an ability and willingness to canvass for business on a scale unimaginable to most high street practitioners: television and radio campaigns, acres of ad space, celebrity endorsements and billboard campaigns.

In so doing they have played a fundamental role in the growth of the personal injury market and, leaving accusations of ambulance chasing and questionable practice to one side, they have, in many cases, shown how to capitalise on an emerging market.
They have also woven themselves into the tapestry of a personal injury claim from initial contact through to legal expenses insurance, medical report provision and rehabilitation.

Over the past few years CMCs have established themselves as being almost essential to any practice, particularly in England and Wales, operating in the personal injury sector but the ongoing relationship between law firm and CMC is deeply uncertain due to the personal injury referral ban which will prohibit law firms paying CMCs referral fees for personal injury leads.

According to the SRA it is the “smaller end of the market that suffers as a result of changes in the market” and this is particularly relevant in the north-west where “solicitors firms are heavily dependent on personal injury work” and where firms with between one and five partners are passed personal injury leads from a large number of smaller CMCs.

Of course CMCs have demonstrated acute business acumen to date and with their own existence threatened by the ban one will no doubt expect them to find a way around referral fees being classed as such. As the SRA report states: “The difficulty will be in establishing whether the payment is for the referral, particularly where the introducer is providing services to the solicitor, such as marketing, vetting of claims or other claims management activities.”

The SRA also confirmed just a few weeks ago that joint ventures between solicitors and CMC’s as alternative business structures (ABS), will not be subject to this ban. As a result, CMC’s will be able to take in income that they would have received in referral fees.

However, the view is that this type of relationship will only be viable for larger law firms and larger CMCs and undoubtedly the CMC industry now faces a challenging future. On the flip side, this ban will open up a tranche of the market to smaller law firms willing to get serious about client acquisition.
Today the cheapest route to market is ?the internet and as internet usage grows ?to unprecedented levels and Google focuses its efforts on rewarding established local business who have robust online presences with prominence in search there could be significant opportunities for smaller firms ?to stamp their own mark, removing the need for referral fees. To ensure that, in an online sense at least, your firm is ready for the referral fee ban:

1. Have somebody with a demonstrable expertise in search engine optimisation (SEO) look over your site to ensure that the right flags are there for the search engines.

2. Be realistic about budget. As well as being competitive offline, personal injury is competitive online.

3. Focus initially on your local market with a view to widening out thereafter on the basis of success.

4. Commit to content. The objective is to rank well for as many key phrases as possible and this will only happen as a result of increased content.

5. Make sure your content is engaging, relevant and likely to be shared. This will create back links for your site and improve trust and therefore rankings ?in search.

6. Have your content published elsewhere

Having an online presence is more than simply another shop front. It’s an indicator of trust and an opportunity for you to get across your values and expertise to potential clients who may otherwise never find you. It’s a platform for you to interact with potential and existing clients, to showcase your achievements and accreditations and to draw in business. The marketing tools available to large firms, CMCs and the new hybrid businesses are likely to be unavailable to you. Internet marketing is affordable, scalable, offers a much better return on investment and leverages one of the most significant changes facing the legal industry to your advantage.