Motor car insurance industry reacts to referral fee ban

The motor car insurance industry and the Government have responded to the Ministry of Justice’s announcement of the abolition of referral fees paid to car insurance companies for passing personal details of road traffic accident victims to solicitor firms and claims management companies.

Referral fee payments have been blamed on the death of discount car insurance in the UK as the selling of accident claim details arguably inflate the number of car accident personal injury cases flooding the courts, which then results in increased car insurance rates to compensate for insurers’ losses.  Justice Minister Jonathon Djanogly said that honest drivers have seen their premium prices increased astronomically as insurers seek to recover the costs of an increasing number of compensation claims, many of which are frivolous and only occur due to the current personal injury legal system in the country permits to many people to gain profit from relatively minor incidents.

Association of British Insurers director general, Otto Thoresen, also commented, stating that the ABI was quite pleased to see the Ministry of Justice had taken heed of the insurance industry’s campaign for the abolition of referral fee payments.  Mr Thoresen said the ban was sorely needed, as referral fees add nothing of value and only work to encourage exaggerated and spurious car accident claims.

The ban must be ‘watertight,’ said the director general, in order to prevent insurers from finding loopholes to continue the practice.  The ban is a key first step in taking on the problem of reforming the UK’s compensation system, which Mr Thoresen called ‘dysfunctional,’ and needed to be accompanied by reductions to legal fees if honest motorists are to receive any benefit from these proposed reforms.

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