Compensation referral fees ban vow
Friday 09 September 2011
The payment of referral fees in personal injury cases will be banned in a bid to tackle rising insurance costs, the Government said today.
Justice Minister Jonathan Djanogly said the no-win, no-fee system was "pushing us into a compensation culture in which middle men make a tidy profit which the rest of us end up paying for through higher insurance premiums and higher prices".
The announcement came as the consumer watchdog said it was putting motor insurance under the spotlight after drivers faced average premium increases of up to 40% in a year.
The Office of Fair Trading (OFT) has issued a call for evidence as it looks to establish if any competition or consumer issues need to be addressed to improve the motor insurance market.
Referral fees are incurred when a no-win, no-fee claim is passed between claims management firms, insurance companies, and lawyers.
Hundreds of pounds can sometimes be paid out as lawyers can claim the cost of referral fees back from the defendant or their insurance company if they are successful.
Mr Djanogly said: "Honest motorists are seeing their premiums hiked up as insurance companies cover the increasing costs of more and more compensation claims.
"Many of the claims are spurious and only happen because the current system allows too many people to profit from minor accidents and incidents.
"Referral fees are one symptom of the compensation culture problem and too much money sloshing through the system.
"People are being encouraged to sue, at no risk to themselves, leaving schools, business and individuals living in fear of being dragged to the courts for simply going about daily life."
He went on: "We will ban referral fees and we will go further.
"We have proposals before Parliament to end the bizarre situation in which people have no stake in the legal costs their cases bring. This will make claimants think harder about whether to sue and give insurance companies and business generally an incentive to pass the savings onto customers through lower prices."
The "shoparound average" for annual comprehensive car insurance cover rose by 40.1% for the 12 months to March 31, according to the AA's British insurance premium index.
But there is currently no timescale for when the ban will be implemented.
The OFT said the call for evidence represented a quick look into the market that may lead to a full inquiry if consumer or competition issues are found.
The role of price comparison sites will be examined by the OFT as it gathers evidence, and particular focus will be given to reports suggesting premiums are significantly higher in Northern Ireland than the rest of the UK.
It also has the power to refer the industry to the Financial Services Authority (FSA), but the OFT could look for voluntary action from insurance companies to assuage any concerns.
As well as looking at price comparison sites, the OFT said it identified a number of aspects of the motor insurance market that may raise competition or consumer issues.
The provision of credit hire replacement vehicles to drivers who are involved in accidents that are not their fault, insurance companies' use of panels of approved repairers, and additional products that are sold by insurance companies will all be considered.
The OFT will be gathering evidence from interested parties, while working with the Ministry of Justice and FSA, and will present its findings in December.
Otto Thoresen, director general of the Association of British Insurers, said: "We are very pleased that the Government has listened to the insurance industry's campaign for a ban on referral fees. They add no value and encourage spurious and exaggerated personal injury claims.
"It is important that the ban must be watertight and apply across the board. Banning referral fees is an important first step in tackling our dysfunctional compensation system, and needs to be accompanied by a reduction in legal costs and action to tackle whiplash if honest customers are to benefit from these reforms."
Which? executive director, Richard Lloyd, said: "This is great news for motorists. Referral fees feed the growing compensation culture that has been pushing up insurance premiums at a time when many families are already feeling the pinch. It's absolutely right to ban them, and quickly."
Crowd-to-let: How crowdfunding sites can give investors a slice of the property market for £500
After the election: What will Britain's financial future look like on 8 May?
General Election 2015: How you vote next week could affect your finances
Social tenants locked into energy tariff for 40 years
Five Questions On: GB Energy's new tariff
- 2 General Election 2015: 14-year-old boy asks Nick Clegg – 'can you kill Katie Hopkins?'
- 3 University student in court for allegedly covering housemates' food in window cleaner and spit
- 4 Ryan Gosling posts tribute to 'Ryan Gosling Won't Eat His Cereal' creator Ryan McHenry
- 5 Garland shooting: Isis claims attack on Prophet Mohamed cartoon contest in Texas as its first action on US soil
In defence of liberal democracy
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...
Day In a Page
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings