Motor insurer Admiral enters legal market in face of referral fee ban

FTSE100 insurer Admiral has stepped into the legal sector via two ABS joint ventures, with Bristol-based claims specialist Lyons Davidson and Cardiff-based compensation firm Cordner Lewis.

The insurance giant first considered the move after the Ministry of Justice (MoJ) announced that it would ban personal injury referral fees, which account for around 5.6 per cent of Admiral’s profits. The Cardiff-based insurer’s shares dropped by more than 4 per cent in 2011 as investors recoiled following the MoJ’s outright ban (9 September 2011), which came into force on 1 April this year.

The joint venture with Lyons Davidson will form Admiral Law and will provide legal advice for Admiral customers, while the partnership with Cordner Lewis will create BDE Law Limited, which will provide advice for other areas of the Admiral brand – Bell, Diamond and The ABS licences will be effective from 1 May. 

In 2011 then justice minister Jonathan Djanogly said the existence of referral fees had contributed to the creation of a compensation culture and had forced insurance companies to push up motor premiums. By converting to an ABS insurers are able to take legal work in-house, enabling them a share of the profit earned by lawyers.

“New and proposed reforms related to the handling of bodily injury claims mean that the ABS businesses are not expected to make a material contribution to Admiral’s profits in the foreseeable future,” the company said in a statement. “Admiral welcomes all actions taken to curb the compensation culture that currently exists within the UK motor insurance market.”

The move comes days after motoring giant RAC laid the foundations for a move into the legal market after agreeing a five-year deal with the Quindell Portfolio, which unveiled plans to launch an ABS last January following its £20m acquisition of Liverpool’s Silverbeck Rymer (5 April 2013).