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Transport Committee to re-examine cost of car insurance2 July 2011by Janice May The ripple effect of Jack Straw's 'racket' remarks in relation to the payment of referral fees to car insurance providers by law firms continues with the Chair of the Transport Select Committee, Labour MP Louise Ellman, now stating that the Committee's enquiry into the high cost of car insurance will be re-opened with Jack Straw and other witnesses being called to give evidence in the Autumn.  Ellman (pictured)
sees Jack Straw's research as 'a powerful contribution to the
debate' and is keen to 'hold the insurance industry and the Government
to account' in those areas that contribute to the rising cost of car
insurance in this country.Jack Straw's position on referral fees paid to car insurance providers was first made public in an article he wrote in the Times and his remarks have intensified the public debate over the payment of referral fees in car insurance. The major French-owned insurer Axa, that runs the Swiftcover car insurance brand, has been the first car insurance provider to publically declare that it will stop accepting referral fees but, as yet, others have not followed suit as unless the industry as a whole were to stop accepting referral fees, individual insurers will be at a financial disadvantage in so-doing, with their ability to offer competitive premiums compromised. When the Transport Select Committee report on the cost of motor insurance was published following the closure of their enquiry earlier this year, while they called for 'transparency' of referral fees payments to car insurance providers that included advising customers of what they had been paid, they did not go so far as to endorse the Jackson Report proposals that included the banning of referral fees. Many commentators on both sides of the debate, from insurers and their representatives to stakeholders in the claims market have called for a referral fees ban after it became clear that while the Government embraced the Jackson Report recommendations - which have been incorported into a current white paper - it is not their intention to ban referral fees. It would seem from her latest remarks that Ellman, particularly in the light of fellow Labour MP Jack Straw's intervention and the stir it has caused, has decided that the case for a ban on referral fees needs to be re-examined. Putting aside the political capital of her remarks and that the Committee has been seen by many claims market stakeholders as biased in favour of the insurance industry, that the Committee will be revisiting the issue of referral fees specifically does apply pressure on the Government to reconsider their position even in advance of their re-opened hearing as it is likely that the Committee's position on referral fees would harden following the new evidence. The Government will recognise this and will need to more publically debate the issue, something it is in need of doing. We should not expect a sudden change of heart, however, as despite the compelling arguments for the banning of referral fees, a Tory-led Government is instinctively disinclined to interfere with market lubricants such as referral fees. As Jack Straw has forced this issue into the public arena and motorists continue to feel let down by the Government, the public will be looking for legislation that will help to control the cost of car insurance by every means possible and a continued refusal to ban referal fees will become an increasingly rocky path for the Government to pursue. |
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