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Jack Straw calls for reform of car insurance industry | Jack Straw calls for reform of car insurance industry |
(about 1 hour later) | |
Former justice secretary Jack Straw is calling for reform of the motor insurance industry. | Former justice secretary Jack Straw is calling for reform of the motor insurance industry. |
He says insurers are getting paid for referring clients' details to personal injury lawyers without permission. | |
In an article for the Times, Mr Straw describes the spiralling cost of insurance - caused by referrals to personal injury lawyers - as a racket. | In an article for the Times, Mr Straw describes the spiralling cost of insurance - caused by referrals to personal injury lawyers - as a racket. |
The Labour MP for Blackburn says he is acting on the concerns of constituents who face rising premiums. | The Labour MP for Blackburn says he is acting on the concerns of constituents who face rising premiums. |
Mr Straw is calling for the government to implement recommendations made last year by Lord Justice Jackson, who said such referral fees should be banned. | Mr Straw is calling for the government to implement recommendations made last year by Lord Justice Jackson, who said such referral fees should be banned. |
"It's become a huge racket," Mr Straw told the Today programme. "The insurance companies are complicit in this. They should and could have said this is outrageous." | |
He said senior executives from two of the country's largest insurers had admitted to him that it was the industry's "dirty secret". | |
"They said, 'If we don't do it everyone else will be doing it'. | |
"The garages, the recovery firms - even the police are selling on this information." | |
Mr Straw is also angry at the high-pressure tactics of legal firms who handle personal injury claims. | |
He told the BBC that a friend was "bombarded" by calls and texts urging him to claim compensation after an accident, despite being uninjured and having not given permission to be contacted. | |
Whiplash injuries | Whiplash injuries |
Earlier this year a report from the Transport Select Committee also detailed how firms are paid referral fees for giving lawyers the names of people involved in crashes. | |
Mr Straw says whiplash injuries are a particular problem and now made up 80% of all claims, even though they were usually entirely trivial. | |
He added that premiums were going up despite safer roads and improvements in car safety and security, meaning sharp drops in thefts and accidents. | |
In 2009, the number of road accidents involving personal injury was 31% down on the average for 1994-98. | |
Thefts of and from a vehicle have slumped - down almost three-quarters (72%) between 1995 and 2010. | Thefts of and from a vehicle have slumped - down almost three-quarters (72%) between 1995 and 2010. |
But the cost of personal injury claims has doubled in 10 years (from £7bn to £14bn) and motor insurance premiums have shot up, by at least 30% in the last year. | But the cost of personal injury claims has doubled in 10 years (from £7bn to £14bn) and motor insurance premiums have shot up, by at least 30% in the last year. |
Support from insurers | Support from insurers |
The Association of British Insurers' Director General Insurance and Health, Nick Starling, said: "We are pleased that Jack Straw has joined our call for referral fees to be banned. | The Association of British Insurers' Director General Insurance and Health, Nick Starling, said: "We are pleased that Jack Straw has joined our call for referral fees to be banned. |
"It is not right that people take cash for tipping off lawyers about accidents which fuel personal injury claims, driving up costs for all motorists. | "It is not right that people take cash for tipping off lawyers about accidents which fuel personal injury claims, driving up costs for all motorists. |
Speaking to the BBC, Mr Starling admitted the system was "absolutely in need of reform" and added that he would be asking Justice Secretary Ken Clarke to take action. | |
However, he also appeared to partly defend insurers that take referral fees from lawyers. | |
"If they [insurers] stopped taking this money, if it went out of their control, everyone else would be taking it - which is why they have to be banned outright. | |
"You can't have one part of the system stopping it and everyone else carrying on. It wouldn't solve the problem." | |
Mr Starling added that insurers weren't profiting overall and last year had made a "large loss". |