Admiral hit by ban on referral fees

9th Sep 2011 07:06

FTSE 100 motor insurer Admiral could see "a small proportion" of its profits put at risk under the government's plans to ban the payment of referral fees to insurers.The Ministry of Justice (MoJ) announced on Friday that it plans to tackle rising insurance costs by placing abolishing the fees, as part of its commitment to curb 'compensation culture'."The current arrangements have led to high costs, encouraged a compensation culture and led to the growth of an industry which pursues claimants for profit," the MoJ said.The fees, which are paid by personal injury lawyers to insurance firms for the details of car accidents, are said to have driven the price of car insurance up by 40% in the last 12 months."Admiral welcomes any action taken to curb the compensation culture that currently exists in the UK motor insurance market."They account for 6% of Admiral's UK car insurance profit before tax - "a small proportion of profits", it said.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 [...] Referral fees are one symptom of the compensation culture problem and too much money sloshing through the system.""Admiral will consider appropriate action as and when further details of the implementation of the ban are made available," Admiral said.BC