Motor insurance unusual practices

DNorris: I've come across a couple of strange practices over past couple of days. Firstly, a client came into the office with current insurance from a nationwide high-street broker. The premium quoted matched our rate on screen - around the £350 mark - however they had discounted the insurer premium by refunding a £100 broker fee then adding a personal accident (PA) policy at £80. They told the client that PA policy is compulsory as it was not offered under her standard insurance. But it is a completely separate product and in no way attached to the policy. It is a general PA policy covering motoring and non-motoring incidents worldwide. I thought this was highly unusual - they would probably be getting 30% plus commission on the PA policy - but stating it is compulsory cannot be right. Has anyone else come across this?

Secondly, a client had a non-fault claim with a third party. The broker has been calling them to encourage them to use their own after-the-event legal protection in order to claim their injuries/uninsured losses instead of the before-the-event cover they have with us.

Would the insurer be happy knowing they were encouraging the client to do this? I'm assuming the broker is just trying to get the referral fee and this is not passed on to insurer.

Millward: Tut tut. Both are extremely naughty.

Virtuocity: I couldn't comment on your second point except to quote the famous philosopher Mr Miyagi: "If something smells fishy, it's normally a fish". OK, I made that up.

As for the first one, I don't think it's right. It should not be allowed and I think it's blatant salesmanship. However, the broker can reduce commission or fees whenever they want.

The best deal for the client would be to refund the broker fee and not add on the PA. However, they won't do this because they won't make as much money and, more importantly, they don't have to.

Tizza: You don't think that the sale of the PA policy was based on a target for which the broker would get a free holiday if they sold enough - heaven forbid such a conflict should exist?

DNorris: That's very specific, Tizza - tell all.

Alan Johnston: Sharp practices indeed, but unusual? I seem to recall a 'nationwide high-street motor broker' receiving £1m worth of slaps on the wrist from the FSA, not so very long ago, for a variation on that PA 'tactic'.