Daily briefing: Wednesday - Referral fees debate heads to Whitehall

Today, following three days of unprecedented focus on referral fees, the debate on whether they should be banned has shifted to the House of Commons.

Ex-justice secretary Jack Straw has pledged that he will amend the Legal Aid, Sentencing and Punishment of Offenders Bill, due to be debated for the first time by MPs today, to introduce a ban on the controversial practice.

Lines are drawn

Yesterday Straw, who has stirred up a hornet’s nest following his calls for the referral fees to be banned, criticised the coalition government’s failure to use the opportunity provided by the bill to stop them.

Biba has also weighed into the debate, but chose to sit on the fence.

The association has highlighted its estimate that the activities of claims and accident management add £1bn to the total cost of UK motor claims. But it says that, rather than wash their hands of the practice, brokers should only deal with the more reputable end of the claims management market and shun companies that send out the unsolicited text messages regarded by many as an inducement to claim.

With the referral fee debate becoming increasingly contentious, Biba has emphasised that the mounting costs of claims must be balanced against the need to ensure access to justice. However, this week’s furore shows that, for the majority of motorists who continue to play by the rules, access to affordable motor insurance is more important.

Hungry for more

This morning, accountants Grant Thornton published a new survey showing that private equity investors’ appetite for financial services businesses remains strong.

The debt markets, which help fund private equity buy-outs, are back in business following the financial crash. And with many other sectors suffering from consumers’ diminished purchasing power, the stable cash flow offered by insurance is an increasingly attractive prospect. The bidding war to purchase RAC is only the most recent sign of private equity’s renewed interest in the sector.

However, the survey also shows that many venture capitalists harbour worries over regulation. With the likelihood of a year’s delay to Solvency II increasing by the week as Europe’s politicians haggle over the final shape of the directive, uncertainty over the industry’s regulatory framework is set to linger for some time to come.

Swift exit

This lunchtime, AXA Personal Lines announced that managing director of claims Tony Peppard is leaving the company along with two of his key lieutenants. The decision by Peppard, who was handed the role by Steve Hardy following AXA’s restructuring of its insurance businesses at the end of last year, is bound to be a blow for the personal lines chief executive.

Insurance Times understands that all three left of their own accord and were not pushed. However, it can only be significant that the timing of Peppard’s departure coincides with that of his fellow co-founders at claims management company SIMS, which was swallowed up by AXA subsidiary Swiftcover in 2009.