Daily briefing: Tuesday - Short-term pain, long-term gain

Insurers are firmly in the national spotlight today, following Jack Straw's intervention in the debate on referral fees. The television news last night broadcast a series of reports condemning the industry for apparently taking backhanders, benefiting at the cost of innocent motorists who face spiralling premiums.

But, as we know, the true picture is a lot more complex. Insurers do take referral fees – but usually to offset what they pay out in claims generated by the same system, and even then at a loss.

Widen the spotlight

The data protection watchdog has confirmed its intention to look into Straw’s complaint that insurers are selling their clients' details on to claims farmers. But it must not limit its investigation to insurers.

Numerous third parties, including brokers, suppliers and even public sector bodies such as the police, are also benefiting from these arrangements. Not to mention the real culprits: the claims management companies, or 'claims farmers', whose very existence depends on these fees.

A win-win situation?

Greater transparency around these arrangements would add serious weight to the industry’s calls for reform, especially given the vested interests of lawyers and trade unions that want the fees to stay in place. AXA has made a smart PR move with its announcement today that it will no longer accept such fees – although its business model was far less dependent on such payments than many of its competitors. Those insurers that can afford to will no doubt follow suit.

This furore will damage the industry in the short term, particularly while insurers are painted unilaterally as the bad guys. But some good may come of it. If national attention adds weight to the pressure for reform inside Whitehall and in the pages of the national press, then eventually the industry and its customers could both be the winners.

CBG up for grabs

As we revealed yesterday evening, CBG is believed to be on the hunt for a buyer. It would be a tasty acquisition, whether for a smaller broker in search of scale, or a consolidator in search of a big deal. Either way, CBG would come off the AIM market – a timely warning to those brokers desperate to list.