Claimant lawyers could be out of pocket over RTA reforms
Government proposals to cut fixed fees for low-level road traffic accident (RTA) claims by £700 could leave claimant lawyers £200 out of pocket, according to research commissioned by the Association of Personal Injury Lawyers (APIL).
The reason for the reduction—from £1,200 to £500 for RTA portal claims worth up to £10,000—is that personal injury firms will no longer pay referral fees after these are banned in April.
However, the government’s reasoning has been questioned by legal consultant Andrew Otterburn, whose research is presented in APIL’s response to the Ministry of Justice’s (MoJ’s) proposals to extend the RTA portal scheme.
Otterburn points out that firms will still need to market themselves, either through an in-house department or through a third party, such as a marketing collective or a claims management company.
He says marketing in this sector is complex and expensive, and identifies the cost as being about £700 per case. It can include television advertising, website optimisation, pay per click or direct marketing. Consequently, claimant lawyers stand to make a £200 loss before they begin the average 10 hours’ work required to complete each case.
He concludes: “Unless firms are able to cross-subsidise they will no longer be able to do this work profitably and…will have to run down their departments.
“It might be possible to charge clients an amount in addition to their ‘recoverable’ fee; however, clients may be unwilling to pay this. The result will be that victims of accidents will not be represented and firms will be forced to close.”
The RTA portal was due to be extended in April to cover claims up to £25,000 and employer’s liability and public liability claims. However, the MoJ has postponed the start date and is now “considering afresh the timing for implementation”.
In an APIL survey of its members, only 47 of 155 firms (30%) said they would continue to do personal injury work under £25,000 if the government’s plans go ahead unchanged—24 firms said they would pull out, and 84 firms were unsure. Redundancies were anticipated at 118 of the firms (nearly three-quarters), while 23 were unsure and only 14 do not expect to reduce staff.
