Motor insurer Admiral has revealed that referral fees made up 5.6% of its UK car insurance profit before tax in the first half of 2011.

The controversial fees, which insurers receive for referring claims information to personal injury lawyers, made up 8.8% of Admiral's ancillary contribution (total ancillary income minus third party ancillary costs).

"If there was a straightforward ban of referral income and we weren’t able to compensate in any way, that would equate to a 10% fall in ancillary income and a 5% fall in profits," Admiral chief operating officer David Stevens told Insurance Times.

However, he played down the extent to which any such ban, if enacted, would reduce motor rates, which have risen sharply over the last two years in respose to rising bodily injury claims.

"We think [referral fees] should be banned but we think it is very important to recognise that there is a historic opportunity to implement fundamental reform, and banning referral fees is not a fundamental reform - it will not have that material an impact on car insurance premiums," Stevens said.

"The fundamental reform is to significantly reduce legal costs associated with small bodily injury claims. It is those elevated legal costs that create the profits that leads to the payment of referral fees in the first place."

Admiral reported a 29% rise in first-half profit after tax this morning. Ancillary income made up 54% of Admiral's first half UK motor profit before tax.