Car insurance firms are split over calls to scrap referral fees paid to lawyers and claims management firms after accidents.
Axa has already stopped selling details of customers who have made claims to legal firms.
But Admiral – one of the UK’s largest car insurers – revealed £147 million of the firm’s £350 million profits for last year came from the fees – and senior managers have warned they will not stop until the law says they must.
Car insurers pass the details of motorists who have made an accident claim on to firms who arrange hire cars, repairs and brief lawyers to chase up personal injury claims.
Some lawyers are believed to pay up to £800 a time to car insurers for personal injury case leads.
The practise is worth millions of pounds a year and is blamed by politicians and insurance companies as one of the reasons car cover is rising at such huge rates.
The average cost of car insurance has increased at around 30% a year for the past few years
Labour MP Jack Straw is waging a war against the fees, labelling them as ‘racket’.
Now, Axa is urging the government to cut the fees no-win, no-fee lawyers can charge.
“While we welcome signals that the government is minded to impose a market-wide ban on referral fees, they are a symptom – not the cause – of the increase in personal injury claims,” argued Paul Evans, Axa UK chief executive.
“We believe more radical steps are needed. Firstly, a robust review of the fixed fees earned by personal injury lawyers,” he said.
Evans blames the government for letting lawyers charge fees that are too high.
He revealed lawyers for the no-fault driver charge fixed fees of £1,200 to the other side’s insurer for processing a compensation claim.
“If they can still make a £400 profit after paying out £800 for the claimant’s details, their fees must be too high,” said Evans. “The government ought to reduce the fee to £400. The solicitor would still make the same profit.”
The idea is solicitors would still take on personal injury claims, but directly from clients rather than paying insurers for leads.