After new information has come to light indicating that car insurance companies sell motorists’ personal details to other firms, former Justice secretary Jack Straw has begun a campaign to shake up the motor car insurance industry.
The only provider of discount car insurance quotes in the UK that has pledged to do away with the practice has been Axa. The insurer has urged the government to take steps to ban the practice altogether, blaming the current ‘no win, no fee’ legal arrangement used by accident claim lawyers for the referral of customer details for cash.
The so-called ‘referral fee’ system increases the costs associated with car insurance, since those insurance policyholders that have had the ill fortune to be involved in a car accident are then approached by injury solicitor firms and encouraged to bring claims that may be frivolous in nature. Mr Straw described the practice as nothing more than a ‘racket,’ as car insurance rates have risen in order to accommodate a dramatic increase in the number of personal injury claims brought against insurers.
Insurance premiums were found to have increased by an average of 31 per cent in 2010. According to official figures from the Department of Transport, the number of road traffic accidents that involved personal injuries actually declined by 10 per cent over the past three years, yet over the same period of time, motor insurance claims for personal injury have increased by a factor of 43 per cent.
The lion’s share of this is due to legal fees. Official statistics report that an extra 87p is paid out in legal fees for every £1 insurance providers pay out in injury compensation awards, and the only way for insurers to stay in the black is to increase their premium prices in order to compensate.