Premiums news
23/09/2011
Cheaper car insurance as government plans to stop referral fees
The UK government is seeking to investigate and, possibly, seek a ban on referral fees in order to provide cheaper car insurance for motorists.
Justice Minister, Jonathan Djanogly, stated, "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 through higher insurance premiums and prices."
Annual car insurance premiums have been steadily increasing, in some cases by as much as 40% in a 12 month period.
The Office of Fair Trading is investigating the matter, and is hoping to reveal its findings in December.
If its research reveals that the industry has been working in a non-competitive way then further action will be taken to improve the way the market functions.
In the UK motorists can, at present, make a claim for compensation on a "no win, no fee" basis after they have been involved in an accident. This means that the claim is passed between the insurance company and the management company, as well as the lawyers who all charge each other for the information and the claim referral. Lawyers then make up their spending costs from the losing defendant.
If the government is successful with its wish to put an end to referral fees, then this is likely to lead to a decrease in the amount of false personal injuries claims being made, which will mean that insurers will, hopefully, be able to offer their customers cheaper car insurance.