Cross-party support for a statutory regulator inevitable unless public sees reductions
Former justice secretary Jack Straw is working on getting cross-party support for a separate regulator for motor insurance.
Straw warned that the only way motor insurers could avoid their own regulator was if they made a dramatic cut in premiums.
Despite moving to the back benches, Straw still carries a lot of weight in parliament, having successfully whipped up support for a ban on referral fees.
At an ‘I Love Claims’ debate last week in London with the insurance industry, Straw said: “Unless the public sees a cut in its premiums, there will be tougher action to follow. I don’t think it will be possible to dodge and weave and think this will go away: you will see cross-party support for a statutory regulator.”
Market research firm Consumer Intelligence managing director Ian Hughes, speaking at the same event, backed Straw.
He said: “If you don’t change, you are going to get legislation and consumers are going to love it because it will bring premiums down.”
AXA Commercial claims and underwriting director David Williams pledged at a fringe meeting at last week’s Labour conference that cutting referral fees would bring down premiums. He said: “If you take out referral fees, motor premiums will go down.”
Meanwhile, the government has started work on curbing the fees solicitors are paid for handling road accident personal injury cases, justice minister Jonathan Djanogly has revealed.
The minister told Insurance Times at this week’s Conservative Party conference that the government was exploring the regulations surrounding the fees, which lawyers receive for processing claims through the road traffic accident portal.
Djanogly, who was the subject of fresh flak this week over his family’s stakes in various insurance-related businesses, said: “The conversations have already started.”
‘We have no plans at the moment to regulate price. We have a substantial series of reforms on at the moment’
Jonathan Djanogly, justice minister
Earlier at an ABI conference fringe event, Djanogly said: “If you are going to get premiums down, you have to get fixed costs. It would be unacceptable if those fixed fees just ended up in the pockets of claimant lawyers.”
He also revealed at the fringe meeting that while the government’s proposed referral fee ban, announced last month, would initially apply to personal injury cases, the intention was to extend it to all forms of liability.
But he said that the government had no immediate plans to introduce further statutory regulation to curb rising motor insurance premiums.
Insurance Times has learned that justice secretary Ken Clarke, who is Djanogly’s boss, has been privately sympathetic with his predecessor Jack Straw’s push to reform the regulation of motor insurance.
Djanogly said: “We have no plans at the moment to regulate price. We have a substantial series of reforms on at the moment.”
However, he confirmed that the rising cost of motor premiums was firmly on the government’s agenda.
He said: “Premiums went up 40% last year, which is not proportionate. We want to see premiums coming down.”
Djanogly hit back at criticisms in the media that there could be conflicts of interest in family ownership of insurance industry firms, saying that it was “shoddy and lazy journalism”, adding that he had declared all of his interests properly.
We say …
● It’s good to see the government making progress on fixed fees. As the minister realises, a clampdown on referral fees without a corresponding cut in solicitors’ costs would merely deliver a windfall for the lawyers, bringing no net benefit for insurers or their policyholders.
● Some argue that the costs were hammered out following long deliberation and so should not be altered without a similarly exhaustive process. However, the government needs to grasp this issue now and not kick it into the long grass.