Insurance giant CGU is paying some of the law firms on its panel as little as u90 per hour about u30 below the going rate, it is being claimed.
Reliable sources tell The Lawyer it has been agreed that panel firms will receive u90 per hour regardless of the lawyer's seniority.
And each time the firms receive u250,000 worth of work, CGU requires a “free” lawyer, for example a paralegal, to go in-house to assist, it is claimed.
CGU denies the claims, but refuses to say what it is paying. It says the information is part of a “confidential commercial agreement”.
A reliable source says: “The current going rate is about u120 per hour for personal injury work. We have always given a volume discount rate for insurance companies as they are very important clients.
“Firms were asked to bid against each other but people were saying they can't do the work at this rate.”
He adds the rate will effect larger firms more, which have higher overheads and thus reduced profit margins.
“The whole process of claims handling is changing. Firms are now judged on statistics rather than on the relationship they have with the client,” he says.
Another insider says: “Charging this rate has implications for the future of the going rate.”
Last month CGU cut its panel from over 100 firms to 18.