The Information Commissioner is to launch an investigation into whether insurers are breaking data protection laws by passing on customer information to cash in on referral fees.
Christopher Graham is expected to investigate whether the tactic is illegal, although insurers are expected to defend themselves by pointing out they warn customers on renewal forms that their information could be passed to third parties.
The pressure on insurers is building after former Home Secretary Jack Straw yesterday called referral fees a "racket".
UK police forces are making millions of pounds from selling referral fees, evidence to the Transport Select Committee revealed. This was later obtained by Straw.
The evidence shows that when a car cannot be driven away from the scene of an accident, police who arrive quickly make a call to a local garage or breakdown company.
Forces who have agreed a fee in advance, then receive a 'tip off' or 'referral fee ranging from £5 to £25, according to the Daily Mail.
According to Swiftcover, the West Midlands Police made more than £622,000 in one year from selling details on almost 25,000 vehicles.
The research showed that seven of nine forces interviewed did not charge a referral fee for arranging for cars to be collected after a crash or breakdown.
Based on this, more than 75% of the 54 forces in Britain are likely to be charging referral fees.
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