Insurance: Only tough legislation can end high referral fees

By Matthew Whittall, managing director, Innovation Group

I, like many of my colleagues involved with the insurance industry, viewed the recent Channel 4 Dispatches programme about supposed profits before premiums with interest.

The truth of the matter is that all insurers work hard to control costs and deliver a good service when their customer is at fault.

When the customer is not at fault, then insurers know they will not foot the bill so don’t take care to control costs.

In fact, it is common practice to pass the handling of this “non-fault” claim to a legal company which pays referral fees for the privilege.

This is all entirely within the law.

In my experience, the legal companies which win this business tend to be the ones that pay high referral fees, not those which are especially good at controlling costs.

The highest referral fees are paid by personal injury legal specialists, but hire car companies and some repair companies also pay referral fees for non-fault customer details.

I cannot see how this cycle can be broken without tough legislation.

As (nearly) all insurers are currently profiting from this practice, none can really afford to say we will be the first to stop.

On April 1 legislation was introduced to ban personal injury referral fees.

However, creative legal companies are already looking at ways to circumvent this – and they are finding takers. It remains to be seen whether the regulators will see through this and legislate further.

I would love my industry, service provision to insurers, to return to the level playing field of customer service and value for money.

At the moment this is not the case – and car drivers are reminded of this every time their premium is due.

If the industry is truly serious about reducing premiums and is determined to implement real change, it needs to stand up, be honest about the current vicious cycle of fees and therefore high premiums and address these issues head-on.

Only then can the industry start the process of becoming future-ready and begin reinstating consumer trust.