Ian Clark on the need to ban referral fees

I have seen it all now – Kenneth Clarke and Jack Straw agreeing on something.

This unusual occurrence sees both parties acknowledging the need to ban claims referral fees. What began as a valid initiative to help trim the legal aid budget has turned into an open sore for motor insurers. Ultimately, the consumer pays the price.

But a referral fee ban is only part of the changes that could be introduced as part of the Jackson report, much of which will be implemented subject to parliamentary time. One outcome is that we are probably looking at the final death throes of the after-the-event insurance market.

All of this will create change, but perhaps the biggest change will come in October when third parties will be allowed to own law firms. Only at that stage will the real changes to the claims value chain become clear.

The dance is about to start – it’s time to find a partner.

Ian Clark is an insurance partner at Deloitte.