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A clear view of ‘kick backs’ in ULR
by Helen Withers, Managing Director of Arc Legal Assistance.
When the Law Society announced earlier this year that its rules relating to the payment of referral fees for personal injury cases were to be amended to recognise the practice, there was little response from the Uninsured Loss Recovery (ULR) market. The decision offers providers the opportunity to open up their processes and demonstrate to intermediaries, and their customers, that ULR is a reputable and viable market.
For many years the practice of ‘kick backs’ was perceived as a behind the scenes activity, conducted in the shadows. This ‘clandestine’ view no doubt contributed in some way to the poor image and less than favourable comments made about ULR over the years.
The decision of the Council of the Law Society effectively brought the practice out in to the open, making it part of the overall commercial equation in the sale of ULR products. Intermediaries are in a strong position to take a lead role in ensuring the elements of this process remain transparent and that the market is open about where and how profits are made.
The provision of low cost, or even free, ULR cover has always raised questions about the structure of products and the viability of providers. Sadly, these still remain relevant today. Intermediaries should be questioning a provider about what sits behind their cover. If it is at low or no cost, is it an actual insured product? The lack of insurance-backed products has plagued the ATE claims market with failures resulting from side arrangements replacing insurance policies. Of course, in a commercial environment these offers can prove extremely tempting. However, if the market is to improve its reputation it has to tackle the ‘freebie culture’.
Intermediaries also need to engage in the debate over cost-v-service. Time and time again we hear stories of how ‘great deals’ turn into customer service nightmares. A claim arises and the client receives a poor response or, even worse, no claims service at all. Service delivery is the key to the market’s future success. The one question intermediaries must ask providers is about the level of service. By focusing on the legal expertise behind the claim – its track record, experience and success rates on ULR claims – intermediaries will be able to ensure the cover really will protect their client. If the policy isn’t backed up by a suitably qualified firm why take the risk?
Transparency in the process will also enable intermediaries to gain a greater understanding of the products value chain. Throughout the process, the payment of referral fees or other ‘kick backs’ will reduce their profitability. By identifying these various arrangements and who is receiving them the intermediary will improve their understanding of the process and identify opportunities to improve their own returns.
There may well be cost implications resulting from the shift in emphasis but surely a more transparent market, which delivers on service, is better news for providers, brokers and their clients, and the Regulator.
This article appeared in Post Magazine.