Daily briefing: Wednesday - Closing in on referral fees

Insurance Times reports today that the government is moving to close a loophole that scuppered previous attempts to enforce a ban on referral fees.

One of the problems with the rules pre-2004 was that the regulators had to prove that the individual or company that had received referral fees was receiving it for that purpose and not for other services rendered. Now the onus is on the person or firm in question to prove that it wasn’t a referral fee.

Some, like Kennedy’s, are sceptical about whether the legislation has been drawn sufficiently tight to ensure that theses fees will be caught in the net.

These concerns are worth voicing, but the legislation appears to be set out widely enough to capture most instances of the controversial practice.

And it must be remembered that this is only primary legislation – the detailed rules must wait at least for the secondary legislation.  

In addition, regulators appear to be better placed to enforce any ban. The Solicitors Regulation Authority may not be as strong a regulator as many would wish. Nevertheless, it possesses a few more teeth than the self-policing arrangements that the lawyers’ trade body operated pre-2004.

Where BMW leads …

Insurance has seen some significant technological innovation over the past two decade - the aggregators obviously spring to mind.

But the initiative by BMW, reported by Insurance Times, to introduce insurance telematics technology into all of its new vehicles, could transform the motor insurance market.

Telematics had a false dawn in the mid noughties, with Aviva pulling the plug on its groundbreaking experiment in 2008.

Younger females, who tend to be much safer drivers than their male counterparts, have a strong financial incentive to buy products that use telematics”

But interest in what Co-operative Banking Group general insurance director David Neave describes as “pay how you drive” in his interview with Insurance Times this week has revived in the wake of the European Court of Justice’s gender discrimination ruling earlier this year. Younger females in particular, who tend to be much safer drivers than their male counterparts, have a strong financial incentive to buy products that use the technology.   

Now BMW’s initiative could remove many of the hurdles standing in the way of a widespread application of telematics by shifting the financial risk of installing the technology from insurers to manufacturers.  

BMW’s thinking appears to be that telematics will be as common as the sat nav in a decade’s time, so it makes sense to steal a march on its competitors and burnish its safety-first credentials. 

Telematics offers further advantages. No longer will insurers have to rely on the relatively crude measure of whether their customers have made a claim: telematics provides a much richer seam of information that should be grist to the underwriter’s mill, enabling far more sophisticated rating judgments.