One FTSE motor car insurance provider recently stated that it has become increasingly concerned that any referral fee ban could result in a severe reduction in profits for the company.
Cheap car insurance provider Admiral Group recently stated that 52 per cent of its car insurance revenue, which amounts to £142.4 million, was generated by ‘ancillary’ sales in 2010.
One of the most successful car insurance companies in the UK since its founding in 1991 by entrepreneur Henry Engelhard, Cardiff-based Admiral Group has become a perennial favourite on the stock exchange. However, the group’s motor insurance market profits has been suffering heavy losses in the past few years.
Justice minster Jonathan Djanogly remarked that the current system for turning a blind eye to to referral fees was in dire need of screaming. Mr Djanogly also stated that steps must be taken to both reduce costs and increase transparency.
A significant proportion of of Admiral’s ancillary sales last year were directly from referral fees, according to the full year results for 2010. These are paid to the insurer whenever it drives new business in the form of an injured party into the arms of a waiting injury firm.
Consumers, politicians, and industry leaders alike have widely criticised this trend, as all have been increasing a tightening of their wallets due to rising car insurance rate across the board. One industry insider even stated that the model Admiral was using was simply not sustainable, even though the stock market seemed to totally disregard the issue.
Admiral issued a response in which they said that they refer customers to an accident management firm only with their express permission, and only when the claim was not their fault.