Should solicitors be able to offer inducements to claimants?

When the Claims Management Regulator (CMR) announced that it would ban inducements by claims management companies (CMCs), it might have been expected that this bold and positive initiative would be echoed across the sector. Having a level playing field for CMCs, legal firms and insurance companies, all operating to the same high standard, would be a sensible and rational approach to the issue.

So when the Solicitors Regulation Authority (SRA) announced that it would not
be following the CMR’s lead, it was very disappointing, to put
it mildly.

Dictionary definition

The SRA stated that they “have no evidence which suggests that inducements encourage spurious claims to be made”. However, they warned that firms “may wish to consider” factors such as whether it fuels a compensation culture, whether it influences the decision to instruct “as opposed to making a decision which is based on expertise and the quality of services offered”, whether the offer is aimed at vulnerable consumers, and whether it results in firms taking on “improper or spurious claims”.

The Oxford Dictionary defines an ‘inducement’ as “a thing that persuades or leads someone to do something” – in other words a change in behaviour. The more negative word ‘enticement’ – “something used to attract or to tempt someone; a lure” – is probably more appropriate to describe a practice that includes cash promises of up to £2,000, shopping vouchers and even
free iPads.

The vast majority of Motor Accident Solicitors Society (MASS) members simply do not believe that it can be considered professional or ethical to offer such promotions in a bid to attract clients. Upfront cash offers suggest that easy money
is available and potentially encourages bad behaviour
by claimants.

It certainly fuels the perception of a compensation culture in Britain and continues to damage the reputation of the sector.
It encourages a choice of firms by the depth of their wallet rather than their qualities or experience as solicitors.

But let’s be clear, pre-medical offers from insurers are surely also a form of enticement and must equally be stopped. The simple truth is that some clients would not bring a claim, yet they are offered money up front in an effort to buy a claim off before it even starts.

This then sets a precedent
for other claimants as invariably they will say ‘I am injured’ when they know the practice of that insurer is to make offers without evidence. Consequently, MASS believes that the Financial Conduct Authority (FCA) must also be involved in banning
this practice.

Marketing gimmicks

Claimants should expect their solicitors to get the best possible deal for them, at the appropriate time. Paying money out to a claimant from a firm’s own funds could put pressure on them
to settle earlier to recoup their money and so may not get
the best final settlement for
the claimant.

Some claimants do have genuine financial concerns while waiting for a settlement, but most firms offer valuable advice to accident victims about their welfare rights and managing personal finances in the interim.

Where an accident victim has a significant injury and there is no dispute on liability, and that person is unable to work, an interim payment, an advance on anticipated damages, is perfectly permissible under the current system. There really is no need to engage in damaging marketing gimmicks that are ethically questionable.

Adverts for cash or other inducements can be misleading and clients’ expectations might not be managed. The small print of such offers often contains the true picture.

Payment is only made in very limited circumstances. Indeed, some of the adverts have been found to be misleading outright by the Advertising Standards Authority. If liability has been admitted and appropriate medical evidence obtained, the chances are that most claims have a strong chance of being settled fairly quickly. So, short of any marketing advantages, there really isn’t a good reason for upfront inducements.

Subjecting CMCs to a
different set of rules from the
rest of the sector is simply the wrong approach. We will continue to press for a common set of rules across all of the sector’s regulators.

Continuing to allow inducements to make a claim does not help the battle against fraudulent claims and combating the ‘have-a-go’ culture. SJ