Simon Read: Referral fees ban will curb the compensation culture

Banning referral fees in personal injury cases will hit ambulance chasing lawyers and unscrupulous insurers alike.

The practice of selling the details of people who have been in an accident is pernicious. It doesn't help the victims and only serves to benefit the legions of annoying no-win, no-fee claims companies and insurers - which line their pockets from the fat fees they get paid for passing on your personal details.

The big benefit that will surely follow from the Ministry of Justice's announcement yesterday that it will ban referral fees is that the unpleasant compensation culture that has been growing will be hit. If the ambulance chasers can't simply pay for details of peoplewho have been in an accident, they won't find it so easy to sign up clients from whom they can make handsome profits.

With the Office of Fair Trading announcing an investigation on Thursday into the car insurance industry's soaring premiums, the ban can't come soon enough. Insurers partly blame the massive hikes in premium pricing on the huge increase in personal injury claims. The fact that they've contributed to the practice by flogging customers details, notwithstanding, most insurers willwelcome the ban. In fact some want the Ministry of Justice to go further.

Paul Evans, boss of AXA UK, says that referral fees are the tip of the iceberg. "As referral fees are directly related to the amount of money lawyers are paid, we also need to see a significant reduction in the fixed fees paid through the Ministry of Justice process. If these fees are not reduced, the ban on referral fees will have no impact on motor insurance premiums."

Reducing the fixed fees would eliminate the huge profit margins lawyers can make from minor injury claims. It's these easy money- making deals that encourage the compensation culture, Evans contends.

Announcing the ban, Justice Minister Jonathan Djanogly said: "The no-win, no-fee system is 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. Honest motorists are seeing their premiums hiked up as insurance companies cover the increasing costs of more and more compensation claims."

He points out that many of the claims are spurious and only happen because the current system allows too many people to profit from minor accidents and incidents. What the ban won't do is stop the endless speculative texts of the "been in an accident? You could claim thousands!" variety. But that's down to you. Just delete the texts. If we all follow suit, they will soon disappear.

PRICE COMPARISON sites were partly blamed by insurers this week for the rise in premiums. The AA said that intense competition between insurers fuelled by price comparison sites kept premiums low while the actual cost of providing cover surged on the back of the growth in personal injury claims and fraud.

The firm said that by 2009 insurers were paying out £123 in claims for every £100 taken in premiums. That is clearly an unsustainable business model so, if you believe insurers, the cost of cover had to soar. In fact it then climbed by 40 per cent in the 12 months to March this year.

But as well as insurers getting fed up with comparison sites so, it seems, are consumers. A study published today shows that despite price comparison sites' money-saving claims, half of consumers think the sites don't offer the best deals in the market. In fact nine out of 10 consumers don't trust comparison sites to pick up all the offers that would suit their needs, according to the research by the collective buying site

You should bear in mind that the company offers an alternative way to get deals on insurance, which means taking its study with a large dose of salt. But there does seem to be growing discontent with comparison sites. With the major insurers - such as Direct Line and Aviva - still noticeably absent from them, they really can't claim to offer deals from across the market. Worse, in my experience, is the seemingly growing practice of pushing to the top of their lists companies which pay more for the privilege of being top, rather than because they may offer better deals.

I'm not ready to write off comparison sites yet as they can still offer a quick way to get a flavour ofwhat may be available, whether you're seeking car insurance, energy deals, or the countless other financial arrangements where price is an issue.

But the only way to find the best deal is to shop around several comparison sites, as well as contacting suppliers directly. It may seem like too much hard work, but that extra bit of shopping will, hopefully, yield decent savings.

COMPLAINTS to financial firms soared 54 per cent in the first six months of the year. While the bulk of them related to mis-sold payment protection insurance, the figures still are a shameful reminder of just how poorly we've been treated by our banks and insurers. They must do better!

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Guru Careers: Pricing Analyst

    £30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

    £21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

    Day In a Page

    Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

    Why Mohammed Emwazi chose Isis

    His friends were betrayed and killed by al-Shabaab
    'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

    Open letter to David Cameron

    Building the walls of fortress Europe has had deadly results
    Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

    You don't say!

    Tory candidates' election tweets not as 'spontaneous' as they appear
    Mubi: Netflix for people who want to stop just watching trash

    So what is Mubi?

    Netflix for people who want to stop just watching trash all the time
    The impossible job: how to follow Kevin Spacey?

    The hardest job in theatre?

    How to follow Kevin Spacey
    Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

    Armenian genocide and the 'good Turks'

    To continue to deny the truth of this mass human cruelty is close to a criminal lie
    Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

    'Lou needed care, but what he got was ECT'

    The truth about the singer's upbringing beyond
    Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

    This human tragedy has been brewing for years

    EU states can't say they were not warned
    Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

    Women's sportswear

    From tackling a marathon to a jog in the park, the right kit can help
    Hillary Clinton's outfits will be as important as her policies in her presidential bid

    Clinton's clothes

    Like it or not, her outfits will be as important as her policies
    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders