July 1, 2011

Venerable fashion chain BIBA made a bewildering contribution this week to the raging debate over so-called referral fees. “Biba advocates that brokers should only work with companies that send unsolicited text messages,” Insurance Times reported.

This seems somewhat perverse, when BIBA has spent much of the past week proclaiming that both referral fees and the unsolicited texts to which they are apt to give rise are very bad things indeed, with which none of its members should be sullying their lily white hands.

Responding to Captain Jack Straw’s anti-RF call to arms, BIBA said that “although claims management companies can offer important services to clients,” they also added a new level of costs “which some believe are exaggerated.”

Jack Straw, readers will recall, has branded referral fees and those that accept them as rancid evil parasites feasting upon the innocent lifeblood of UK motorists, or something like that. How reassuring then for BIBA that none of its members would dream of accepting them. Especially after BIBA warned them this week to “monitor carefully the developments from the Legal Services Board and the Ministry of Justice.”

Insurers too, are vehemently opposed to RFs, with one, AXA, even going so far this week as to announce that it will stop accepting them, and others boldly declaring that they will too, as soon as everybody else does.

Describing them as a “form of legalised bribery,” Jack Straw complained that RFs “drive up costs and actively encourage individuals.” “Everybody in this chain is on the take,” he lamented. And it does indeed seem that nobody in this country wants to work for free any more – a conclusion boding ill for the current Government’s cherished Big Society vision.

Lib Dem backbencher Alan Beef backed up Captain Straw, calling RFs “a scandal,” but went on further to identify the real cause of the problem not in RFs or CMCs but in “a system of fees in which a lawyer can still make a profit from a relatively small claim having paid hundreds of pounds for the privilege of pursuing that claim.” Arguments such as this have already prompted the Government to take advice from representatives of the legal profession on whether lawyers earn too much.

RFs fall outside the presently envisaged scope of the forthcoming Legal Aid, Sentencing and Punishment of Offenders Bill.  Justice Minister Ken Clarke claims that the government has not acted on RFs because it was waiting to hear back from the Legal Services Board, who have now decided they should not be banned.

Meanwhile, the Transport Committee Inquiry into the Cost of Motor Insurance is to be re-opened to take account of Captain Straw’s views, with committee chairperson Louise Ellman worrying aloud that there may be “growing evidence that the insurance industry itself is part of the problem” of rising motor insurance premiums. Let’s hope that absurd misconception is quickly cleared up!

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