Government to end referral fees ‘racket’

Covered mag, presented by
  • | by Kristian Dando

It’s the practice referred to by one industry bigwig as insurance’s ‘dirty little secret’ and the root of those infuriating texts and calls you receive in the middle of the night trying to cajole you into making a personal injury claim.

Oh, and if the statistics are to be believed, the root of the 40 per cent rise in the cost of car insurance over the past year. But the days of insurance companies being handed cash in exchange for accident details by personal injury lawyers look set to be numbered, with the government set to ban it outright.

Justice Minister Jonathan Djanogly said: "Referral fees are one symptom of the compensation culture problem and too much money sloshing through the system. People are being encouraged to sue, at no risk to themselves."

The Association of British Insurers has thrown its weight behind the proposed ban. ABI director general Otto Thoresen said: "We are very pleased that the government has listened to the insurance industry's campaign for a ban on referral fees. They add no value and encourage spurious and exaggerated personal injury claims. It is important that the ban must be watertight and apply across the board.”

The vice-president of the Association of Personal Injury Lawyers, Karl Tonks, expressed a concern that a ban might put the practice the way of badger baiting and cockfighting - underground. "The really important thing is for there to be transparency, so that the injured person, the consumer knows what's happening and their details are only passed on to anybody with their express consent,” he said.

Meanwhile, the Office of Fair Trading is launching an examination into why insurance premiums haven risen by 40 per cent on average in the space of a year.