In response to the rising cost of insurance premiums, a ban on referral fees of personal injury claims has been put forward by Justice Minister Jonathan Djanogly.

There has been a huge rise in personal injury claims in recent years, many of which are promoted through insurance companies after an accident has taken place. The insurer receives a fee from solicitors for each new claim it points in their direction – with companies such as Admiral stating that referral fees amounted to 6% of their UK car insurance profits. The ban would put a stop to the details of claims being sold on by insurance companies to law firms and solicitors.

The practice has been attributed to creating a “blame and claim culture” – leading to unnecessary fees as well as encouraging “spurious and exaggerated personal injury claims”. Car insurance premiums have risen by at least 30% in the last year and it is thought the claims for the sake of claims are to blame.

Motor accidents are usually a high source of these referral fees, with minor whiplash claims accounting for the vast majority of these.

The Association of British Insurers said that they welcomed the announcement. The Director General Otto Thoresen said ”Banning referral fees is an important first step in tackling our dysfunctional compensation system, and needs to be accompanied by a reduction in legal costs and action to tackle whiplash if honest customers are to benefit from these reforms.”