Insurance Post

Labour lukewarm on Jack Straw's referral fees ban

One of the most striking outcomes of yesterday's discussion on referral fees at the All Party Parliamentary Group on Insurance & Financial Services was the lukewarm support from the Labour frontbench for Jack Straw's strident campaign to ban fees.

John Woodcock.jpgJohn Woodcock, Labour's new shadow transport minister (right), was less than enthusiastic about an outright ban: "What troubles me is how do you avoid over-correcting? Clearly there is a broken marketplace but we need to ensure that we retain access to legal advice for people who need it". This view was succinctly echoed by Chris Shaw, commcercial director of AI Claims who was presenting to the group: "We need more of a scalpel rather than a sledgehammer".

This seems a far cry from Mr Straw's call for an outright, all-embracing ban on referral fees in his Motor Insurance Regulation Bill. This features five key provisions:
  • to make it unlawful and a criminal offence to solicit, offer, or pay referral fees relating to a personal injury traffic claim
  • to introduce objective evidence for whiplash claims
  • to half the Ministry of Justice fixed fee for road traffic claims pursued through the portal
  • to prohibit insurers from isolating risk on the basis of a geographic area smaller than a region
  • to bring forward certain provisions in Data Protection Act.

Jonathan Evans, chairman of the group, said that his belief is that most MPs feel that the £1200 flat fee for cases coming through the electronic portal is far too high and that there is a consensus emerging around the call in Mr Straw's bill to cut that by 50%. He was far more cautious about the proposal to criminalise the taking or offering of referral fees but warned that "unless there is a move to take unjustified cost out of the system people will continue to press for drastic action".

One area he suggested could benefit from closer scrutiny was the credit hire business which he alleged pushed up costs and incentivised repairers to take too long through practices such as booking in vehicles on Fridays. He also called for an investigation into allegations that the police may be passing on information from accidents for money.

Clearly, this debate has a long way to run. Many people instinctively feel that referral fees are wrong and have added unnecessarily to motor insurance claims costs. They certainly seem too high and are often paid indiscriminately for large amounts of data with very little justification by any test of public benefit. The challenge is going to be to find precisely where to wield Mr Shaw's scalpel if the market is to avoid Mr Straw's sledgehammer crashing down on it.

One of the other elements of Mr Straw's campaign - a crackdown on whiplash claims - is the topic for the next meeting of the group:

Tuesday 15 November, 4.30pm. Portcullis House, Room N
A new consensus for tackling whiplash culture in the UK
• Can the insurance industry agree on how diagnosis, claims and treatment could be changed?
• Is there a better way?
Speakers: Andy Wigmore, on behalf of Health and Case Management
Prof Sir Mansel Aylward (TBC)  
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