Referral fee ban to hit Admiral’s earnings

One of the UK’s biggest car insurers has warned that the ban on referral fees will hit its full-year earnings.

Admiral, which also owns Elephant.co.uk and price comparison site Confused.com, said it did not sell customer data but if one of its policyholders had an accident which was not their fault it would put them in touch with a personal injury lawyer.

The group, which has more than 2.7m customers worldwide, said personal injury referral fees account for around six per cent of UK car insurance pre-tax profits.

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The insurer was the biggest faller on the FTSE 100 Index after analysts warned that its business model would be firmly in the spotlight following the Ministry of Justice’s ban and the Office of Fair Trading’s decision to look into soaring motor insurance premiums.

A statement from Admiral said: “Admiral welcomes any action taken to curb the compensation culture that currently exists in the UK motor insurance market.”

The company said it would consider “appropriate action” when further details of the implementation of the ban emerge.

Kevin Ryan, an analyst at brokers Investec, said the ban could be the thin end of the wedge for Admiral.

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He also suspects the ban will hit other fees, such as referrals to third-party claims administrators.

“Admiral seems to have been more adept at exploiting these than many of its competitors,” he said.

Mr Ryan said pre-tax profits for referral fees on UK car insurance in the first half of the year were around £9.4m.

Admiral saw its shares come under pressure following the OFT’s call for evidence to establish if there were any competition or consumer issues in the motor insurance market.

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The OFT said the industry could be referred to the Competition Commission or Financial Services Authority if it found reason to believe customers were being unjustly overcharged.

“This is an important step in curbing the compensation culture which has been instrumental in inflating motor insurance premiums,” said Paul Evans, chief executive of French insurer Axa’s UK division.

The move to outlaw the fees had been widely expected by the industry. The Association of British Insurers described a ban as “almost certain” last month.

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