Car insurance companies have been lobbying the Government to pass a ban on referral fees in car accident claims litigation due to concerns that the practice has resulted in soaring car insurance rates.
In the wake of a road accident, the personal details of motor car insurance policyholders involved therein are routinely purchased by accident management firms or personal injury lawyers from many sources, including the police, garages, and insurers directly. Worth an estimated £3 billion a year, the practice has aided in raising premium prices by 50 per cent throughout the past year and a half.
Cheap car insurance provider Axa recently said that fully half of all increases to premium prices are in direct correlation to the meteoric rise in personal injury claims. Association of British Insurers assistant director, James Dalton, called for an outright ban on referral fees, as they are part and parcel of the ‘merry-go-round’ of legal system fees and work to only reinforce the UK’s so-called ‘compensation culture.’
The costs associated with the civil litigation system in the UK are exorbitant, added Mr Dalton, and as these costs are routinely paid by insurance companies, the incurred costs are passed on to customers through higher insurance premiums. The Government is acutely aware of these facts, the ABI assistant director also said, and that he was confident that a ban on the practice of referral fees could easily be incorporated in the impending legal aid bill currently on its way through Parliament.
As so many different organisations receive referral fees – such as insurers, claims management firms, car repair shops, and garages, Mr Dalton stated that a blanket ban was needed in order to cover the entire spectrum. Jonathan Djangoly, the justice minister, himself described the referral fee racket as one of the many symptoms of a litigation culture he called ‘rotten.’