Paul Evans says law could damage insurers’ reputation

AXA chief executive Paul Evans (pictured) has slammed the Legal Serices Act 2007 (known as ‘Tesco Law’), calling it “morally wrong”.

His attack, reported in today’s Financial Times, came as Direct Line Group revealed in its listing prospectus plans to make an application under the law.

Tesco Law paves the way for outside industries, such as insurers, to take a majority stake in a legal firm or even establish their own legal services arm.

Evans is concerned that even when referral fees are banned in 2013, there will still be a ‘perverse incentive’ for insurers to make claims through their legal firms established in the wake of the law.

Speaking in today’s Financial Times, he said: “The reputation risks are high because we (the industry) are trying to imply replace referral fees with an alternative model, which isn’t in the interests of consumers.

“If there are loopholes they will be exploited. When you squeeze a balloon the air goes somewhere else.”

Evans said the insurer was at a commercial disadvantage with its tough stance against referral fees, but AXA would consider buying or establishing a law firm without further government intervention.

Meanwhile, a Direct Line Group spokesman said: “In light of possible regulatory changes to remove dysfunctionality from the UK motor insurance market, which we support, we are looking at a variety of options, including legal services, to ensure we are able to sustain our competitiveness and continue to offer customers choice.”