Jack Straw calls for reform of car insurance industry
- 27 June 2011
- From the section UK
Former justice secretary Jack Straw is calling for reform of the motor insurance industry.
He says insurers are getting paid for referring clients' details to personal injury lawyers without permission.
In an article for the Times, Mr Straw describes the spiralling cost of insurance - caused by referrals to personal injury lawyers - as a racket.
The Labour MP for Blackburn says he is acting on the concerns of constituents who face rising premiums.
Mr Straw is calling for the government to implement recommendations made last year by Lord Justice Jackson, who said such referral fees should be banned.
"It's become a huge racket," Mr Straw told the Today programme. "The insurance companies are complicit in this. They should and could have said this is outrageous."
He said senior executives from two of the country's largest insurers had admitted to him that it was the industry's "dirty secret".
"They said, 'If we don't do it everyone else will be doing it'.
"The garages, the recovery firms - even the police are selling on this information."
Mr Straw is also angry at the high-pressure tactics of legal firms who handle personal injury claims.
He told the BBC that a friend was "bombarded" by calls and texts urging him to claim compensation after an accident, despite being uninjured and having not given permission to be contacted.
Earlier this year a report from the Transport Select Committee also detailed how firms are paid referral fees for giving lawyers the names of people involved in crashes.
Mr Straw says whiplash injuries are a particular problem and now made up 80% of all claims, even though they were usually entirely trivial.
He added that premiums were going up despite safer roads and improvements in car safety and security, meaning sharp drops in thefts and accidents.
In 2009, the number of road accidents involving personal injury was 31% down on the average for 1994-98.
Thefts of and from a vehicle have slumped - down almost three-quarters (72%) between 1995 and 2010.
But the cost of personal injury claims has doubled in 10 years (from £7bn to £14bn) and motor insurance premiums have shot up, by at least 30% in the last year.
Support from insurers
The Association of British Insurers' Director General Insurance and Health, Nick Starling, said: "We are pleased that Jack Straw has joined our call for referral fees to be banned.
"It is not right that people take cash for tipping off lawyers about accidents which fuel personal injury claims, driving up costs for all motorists.
Speaking to the BBC, Mr Starling admitted the system was "absolutely in need of reform" and added that he would be asking Justice Secretary Ken Clarke to take action.
However, he also appeared to partly defend insurers that take referral fees from lawyers.
"If they [insurers] stopped taking this money, if it went out of their control, everyone else would be taking it - which is why they have to be banned outright.
"You can't have one part of the system stopping it and everyone else carrying on. It wouldn't solve the problem."
Mr Starling added that insurers weren't profiting overall and last year had made a "large loss".