Legal Aid, Sentencing and Punishment of Offenders Bill

Louise Ellman Excerpts

Tuesday 1st November 2011 Commons Chamber

I hope that the Minister can clarify exactly how the regulations are intended to work. Obviously, that would be a matter for the regulator, but I am keen to hear the Government’s intention.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

I welcome tonight’s discussion about action on referral fees. In March, the Transport Committee produced a report in which we investigated the reasons for the 40% increase in premiums for private motor insurance. We identified referral fees as one of the reasons. The others included cold calling, inflated bills, high accident rates among young people, fraud and uninsured driving. However, I seek clarification on two areas from the Minister, although some of these points have been raised in earlier contributions.

The first issue is the scope of the Government’s proposals. The Committee’s report referred to the merry-go-round of referral fees and identified not only solicitors, but credit hire firms, vehicle repairers, medical experts and management accident firms. I am not clear from the Minister’s explanation of the new clause whether all, or some, of these organisations will be included in the proposals. If we are looking at referral fees as a reason for the greatly increased costs of motor insurance premiums, it is not good enough to look only at solicitors; we have to look at all these other areas as well.

The second area relates to how companies would be prevented from finding ways of avoiding the new legislation. When the Committee conducted its first inquiry on this issue, we received evidence that if referral fees were banned claims management companies would buy solicitors’ practices and, under the plans for alternative business structures, it could be normal for non-legally qualified individuals to do so. On the face of it, it seems that there would be an easy way of avoiding the legislation. I have not heard anything in detail about how that would be addressed. The Minister is correct that he was asked that question when he came before the Committee two weeks ago, but we received no clear explanation of how the issue would be addressed.

Those are the points that I wished to raise tonight. I know that I shall have other opportunities to look more broadly at the rising costs of motor insurance, but tonight, in this debate on action to be taken over referral fees, I ask for further explanation about how the Government’s proposals will deal with those two important points.