To refer or not to refer, that is the question

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Martin_ed_pic_NEW_0710 small.JPGThe Association of British Insurers (ABI) hasn't been shy in demanding an end to the use of referral fees. It seems that every chance that presents itself, from the news that Jackson's reforms would be implemented in full to any news regarding the cost of car insurance, Nick Starling, the ABI's director of general insurance and health demands an end to the use of referral fees.

And that's no bad thing. It would take an idiot or an accomplished liar to suggest with a straight face that the existence of referral fees in the claims process is a good thing. It patently isn't. It adds costs and creates so many conflicts it puts the Millibands to shame.

But it's not as simple as just getting rid of them and there are two main points I'd like to make here. First of all there are many brokers out there who are reliant on the income that referral fees provide. Now I am not saying that is a favourable way to run a business but the fact remains that many brokers would find themselves in a lot of trouble and many could well end up going to the wall.

Now the demise of some regional brokers may not overly concern the ABI or its members but the insurers' association would do well to remember that the use of referral fees is not the preserve of the broking market.

It is no secret that insurers will pass on motor claims to accident management companies and solicitors safe in the knowledge that it will be the third party insurer that has to foot the bill. This is not news so I'm puzzled as to why the ABI is so forthright about the removal of referral fees.

It's one of two things I think: either the ABI is not in tune with the behaviour of its members which is a dangerous place to be or, and I sincerely hope this is the case, the ABI has decided that regardless of whether its members benefit from referral fees or not, their use places unneeded and extreme costs onto the claims process and by extension, the client.

In journalism school, if you don't already have a very cynical outlook on life when you enter, the tutors ensure that when you head for graduation, you do. So, on that basis I'm not sure that the ABI really is taking the stance of defender of truth and right but just this once I am willing to give them the benefit of the doubt. I hope we're not going to be disappointed.

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