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Insurance lawyers' leader
encourages insurers to provide legal services
26 July 2011
by Hugh Bryant
Tim Oliver, President
of the Forum of Insurance Lawyers (FOIL),
predicting a ban on referral fees in car insurance, has suggested that
this could be a good time for insurance providers to venture into legal
services provision themselves.
 In his Insurance
Times legal column Oliver (pictured) comments: "The creation of an
alternative business structure, specifically for the purpose of
servicing claimant personal injury cases, surely represents a good
opportunity for the insurer to dip its toe into the water".
He
suggests two potential models for the operation of these new legal
firms. Either the insurer would own the law firm (possibly providing a
management fee) or there would be a proft-sharing arrangement with the
law firm partners.
In
his article, entitled "A marriage made in heaven", he suggested that
this would be "a win win situation" as the insurers would be able to
assist their policy-holders to resolve their claims, regardless of
whether the insurer or a third party was liable.
Oliver,
just after his appointment as FOIL President at the end of last year,
advocated cutting independent
injury lawyers out of the claims process via so-called "third
party capture". He argued that there was "no evidence" that a claimant
will not get the correct compensation by settling directly with an
insurance company via one of its panel of lawyers.
His
new alternative business structure proposal would bring car insurance
providers and their lawyers much closer together and, if he is right to
assert that the current relationship between insurers and their panel
of law firms is "at arms-length in many respects", this distance would
be lost, calling into question whether a claimant's best interests
would be served by working with an 'in-house' law firm where their own
insurer is liable for settling the claim.
It
also needs to be borne in mind, of course, that as the main
representative of insurance lawyers, he needs to advocate for their
interests, even if it is at the expense of independent injury lawyers,
as represented by the Association of Personal Injury Lawyers (APIL)
that, although it has campaigned vigourously against many of the Jackson-related
recommendations incorporated in the
current Legal Aid, Sentencing and Punishment of Offenders Bill, tends
to be less concerned about a referral fee ban.
Were
car insurance companies to go down the route proposed by Tim Oliver and
create 'in-house' legal firms, the financial regulator (currently the
FSA, soon to be replaced by the new Financial Conduct Authority, FCA)
would be seeking clear evidence of a Quango-like relationship between
the insurer and the new law firm to dispell any fears in relation to
the obvious conflict of interest where the law firm is trying to secure
compensation from its 'parent' car insurance company.
Car
insurance companies have, thus far, resisted this invitation to 'cosy
up' with their lawyers partly because of the difficulties posed by this
conflict of interest. As Oliver himself states, it remains to be seen
whether a referal fee ban, if it comes, will change the position of car
insurance companies on their provision of legal services.
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