In the Row over Selling Personal Details, Insurers Blame the Lawyers; Major Welsh Employer Admiral Yesterday Blamed No-Win, No-Fee Injury Claims for Results That Disappointed the Stock Market, Yet It Is One of the Many Insurers That Sells Victims' Details to Law Firms. Julia McWatt Reports on One of the Most Controversial Aspects of the Insurance Business
Byline: Julia McWatt
* he practice of insurance companies selling the details of car accidents to personal injury lawyers is a business that is estimated to be worth pounds 3bn a year.
Referral fees are paid to an insurer, claims company or garage by legal representatives to get hold of customer details after an accident, so that they can take on a compensation claim.
The payments made by the lawyers to the insurance companies can help to boost their profits, but it also means an increase in the price of every car insurance policy that is sold.
It is believed that the entire system is a huge burden on the industry, resulting in costs that are passed on to motorists in the form of bigger insurance premiums.
There have been many calls for reform, yet few suggestions as to how it can be done.
Insurance firms decry the lawyers but insist that if they stopped selling the details of victims, the law firms would simply obtain their details another way and premiums would have to rise because they would lose even more money.
Justice Minister Jonathan Djanogly has criticised the payment of referral fees, but has not made any suggestion that the Government will ban it.
He said the practices of referral fees were the symptoms of a "rotten suing culture" rather than the cause.
Justice Secretary Kenneth Clark has said he would consider the issue of banning the fees, which led to the Law Society writing to him to urge him to act immediately.
Society president Linda Lee said: "We are asking the Government to step in and ban a practice that is ethically wrong, treats accident victims as commodities for sale and adds no value to the justice system."
Cardiff-based insurance company Admiral, which has just announced record interim profits, said that when a claimant has suffered an injury, they are able to put them in touch with a third party who can "assist them in recovering their loss".
However, it said it would only do this if the customer agreed that they wanted the company's help.
The company's shares tumbled more than 8% yesterday after its investors focused on a sharp rise in claim costs in Admiral's recent financial results.
The increased claims payouts clipped profits growth to 27% at pounds 160.6m, well below the growth in revenues.
Kevin Chidwick, finance director, blamed personal injury cases but insisted that banning firms from selling customers' details would not solve the issue.
He said: "If you just attack referral fees and don't attack the cause of the claims, the chances are that car insurance premiums are going to rise even further, because the insurers will no longer get the income but they will have to deal with the claims.
"But if you attack the root cause of the claims, then it's probably going to be neutral," he added. …