PUTTING THE BRAKES ON ABS

How could changes to the referral fee system and potential conflicts of interest affect insurers' and brokers' appetites for Alternative Business Structures (ABS)?

Richard Finan of Arc Legal believes that the ABS model may have been seen as an additional revenue generating opportunity from claimant personal injury claims with insurers and brokers looking to retain the solicitors profit element of the recoverable fees. However, with the pending ban on referral fees and, more importantly, reduction in the level of recoverable costs, this may prove a major 'turn off' for some looking to invest. Richard does see growth potential outside of claimant personal injury areas where firms can offer conveyancing and will writing services to their customer as well as defendant services.

The role of the legal expenses provider and ABS, where the services are brought in-house, is one that requires closer scrutiny. This model creates the potential for conflict between the needs of the underwriter and the insured creating commercial pressures which an outsourced model, like that operated by Arc Legal, does not.

Richard was speaking to Insurance Age. The full article can be found on the their website at www.insuranceage.co.uk

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