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| UK Car Insurance |
Car insurance comparison website Car-Insurance.tv has reported that a proposed ban on fees paid for referring accident victims to personal injury lawyers will ultimately lead to higher car insurance premiums.
In an effort to reduce liability claims for all workplace accidents, trips and slips and road traffic accidents, it seems likely that the loss of profits caused by tires will backfire on the insurers of the vehicles themselves. Car Insurance Premiums Increase With The Prohibition Of Claim Referral Fees From The Car Insurance Blog.
Last Friday, the UK Government coalition announced that it intends to ban the practice of accepting a fee in exchange for passing traffic accident victim information to lawyers, so-called 'referral fees'.
Auto insurance premiums have increased throughout the year as the market hardened to match claims reserves.
AA's recent report of a 40% surcharge over the average premium has sparked an investigation into the industry by the FSA and OFT. On the same day that the investigative announcement was made, the Government also announced that referral fees would be prohibited.
To be fair, OFT has been investigating anticompetitive and pricing practices in the UK Auto Insurance market for almost two years now, but since former Justice Minister Jack Straw called claims management companies 'pariah' and ambulance chasers in June of this year, the insurance premiums association higher cars and rising claims costs, were ingrained in the psyche of the British public.
On further investigation by the British media it turns out that the insurance company itself is the main contributor of referral fees and also the main provider of personal data to third party companies!
When an insurance company refers your data to an accident claims management company they accept anything up to £1000 per case. Since costs cannot be assigned to the losing party, the costs of the fees are paid by the accepting attorney and are not recoverable from the losing party's liability. There is effectively no subrogation of fees and selling your data is a win-win situation for any underwriting auto insurance company.
Admiral Insurance, which has many faces online including confused and elephant, has stated that since referral fees make up 6% of their profits, any ban would inevitably lead to higher car insurance premiums.
Paradoxically, although major insurers have complained about CFA and lawyers not winning without charge for years in the industry press, it was enough to trigger two major judicial reviews.
So in passing, car insurance companies seem to have cut their noses off to ruin their faces and those tires will almost certainly lead to higher auto insurance premiums. The problem is, referral fees are only a symptom of the lost claim and are not a component of the claim loss itself.
Governments clearly and mistakenly feel that if you remove fees for 'advertising' or facilitation, you will reduce demand in the market. Car Insurance Blog believes this is very naive!
If people get hurt then they will claim. The real difficulty with the rising costs of motor insurance claims is the total cost of whiplash claims and the civil attorney's hourly fee, both of which should be capped at much lower levels than they currently are.
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