How useful were PI claim inducements?

Claims management companies (CMCs) were banned from offering inducements to personal injury (PI) claimants in the 2012 Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act. To create parity, the Criminal Justice and Courts Bill proposes banning personal injury firms from offering inducements to claimants. The clause, still going through the Lords, aims to tackle the country's so-called 'compensation culture' by removing any encouragement to make a claim as well as combatting fraudulent claims.

This move has been a long time in the coming, with Lord Young first recommending it in his Common Sense, Common Safety report in 2010, when he called for there to be a ban on offering inducements by firms or CMCs.

However, until the Criminal Justice and Courts Bill, there has been some confusion about how firms treated inducements. Following LASPO, the SRA rejected a ban, claiming, "there's no evidence to suggest that similar activity by those regulated by the SRA has any adverse effect on clients".

This drew criticism from the Association of Personal Injury Lawyers (APIL), who said the fact that "a higher standard is already imposed on claims management companies but not on solicitors is simply unacceptable". Craig Budsworth, the chairman of the Motor Accident Solicitors Society (MASS), was also critical: "offering cash upfront or a free gift like an iPad to attract claimants will not help in the battle against fraud", and, "combatting the 'have-a-go' culture must be a top priority and banning enticements to claim will help reassure consumers."

Advance payment test

At Paul Rooney Solicitors, we tested the role and purpose of inducements and had some interesting results. We offered an advance payment, subject to a medical and the signing of a client care pack, which included an authority to act. The results were enlightening and counterintuitive to the line espoused by the government and insurance industry that inducements fuel a compensation culture where claimants were looking for a 'quick buck.'

Commercially, the reason for using an inducement was to test whether we attracted a higher number of cases. Naturally we look for well-motivated clients, but found there tended to be a correlation between those who were interested in the inducement and less-motivated clients. In essence, the inducement may have increased the number of enquiries but the quality remained questionable.

We put in place processes to filter out possible fraudulent claims by ensuring completion of a medical assessment, but found that fraud was not a significant issue.

You might imagine that the offer of 'cash now' would have universal appeal. However, many of the clients who had the opportunity of an advanced payment declined it. This doesn't fit with the stereotyped image of cash hardened or fraudulent customers. Instead, it suggests that the effect of inducements by claimants and firms is more nuanced than the simplistic line offered by the insurance industry and government.

Firm reputation

Our research suggests that the primary reason why clients select us is not the offer of an inducement but the value of our reputation and the quality of our service, which has been built by word of mouth recommendations, radio advertising and our strong North West presence.

When reviewing the data, we found that claimants who suffered pressing financial concerns were most likely to make use of the inducement. For these claimants the money allowed them the security and peace of mind to pursue their claim to the full.

In marketing terms, inducements can be relatively clumsy and firms that acquire a reputation solely on the basis of inducements could find themselves attracting the wrong type of clients - those who are simply promiscuous - and attracted by the latest 'shiny thing.'

We have met the challenges provided by LASPO, not by gimmicky marketing incentives aimed at improving short-term revenue, but through a more structured approach to building long-term sustainability. We have embarked on a programme of strategic diversification which includes broadening our core PI business through the acquisition of specialist legal practices.

We have widened our product and channel propositions to include legal clinics, housing disrepair meetings and opening of a city centre customer advice centre, all of which are contributing directly to future profitability.

We agree with a statement made by APIL in 2013, that, "an injured person should not be distracted from choosing the best solicitor by a cash inducement or gift, from another, who may not be best qualified to deal with the case."

Caroline Sergeant is a senior personal injury solicitor and technical manager at the Liverpool office of Paul Rooney Solicitors.

Sergeant is also a member of the Association of Personal Injury Lawyers (APIL)

www.paulrooney.co.uk

caroline.sergeant@paulrooney.co.uk