DJangoly critical of car insurance companies’ referral fees

Justice minister Jonathan Djanogly was recently heard to have been critical of car insurance companies receiving referral fees from personal injury lawyers, but did not go so far as to say the government was considering a ban.

In a recent radio interview, the minister maintained that the referrals system gave people perverse incentives to bring unjustified claims against their motor car insurance providers.  He also said that the government would be examining a number of practices including garages selling lists of motorists who were involved in road traffic accidents, touting for business via text messaging, and referral fees.

The justice minister also said that while these actions may be the cause of increases to car insurance rates in the UK.  However, he added that the behaviour in question is more of a symptom than a cause of the so-called ‘compensation culture’ that has been gripping the country as of late.

The selling of car accident details to personal injury lawyers is estimated to generate approximately £3 billion in revenue every year, according to Jack Straw.  The former justice, foreign, and home secretary has hit out against the practice, calling it a ‘racket’ and also urging that it be banned completely.

Banning referral fees would most likely not remedy the matter, countered Djangoly.  Those within the insurance industry would most likely find some other route to generate revenue, he said, adding that frivolous claims are all the more prevalent because claimants run no risk of monetary loss even in the event their case is unsuccessful.

The government’s plans for taking on this problem include a transference of the costs of litigation away from the defendant and onto the claimant to encourage claims lawyers to choose their cases with more care and to ensure claimants have a stake in what they pay to their legal representation.

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