The ban on referral fees in personal injury is set to cost Admiral Insurance around £15m this year, it emerged yesterday.
The insurer also reiterated its expectation that because of the Jackson reforms and likely changes to whiplash claims, its two new alternative business structure (ABS) joint ventures are “not expected to make a material contribution to group profits in the foreseeable future”.
The company’s results for the first six months of 2013 said the referral fee ban has so far reduced Admiral’s revenue per vehicle by around £2 and will reduce it by a further £3 by the end of 2013 – it insures just over three million vehicles.
However, “Admiral expects this reduction in revenue will be offset by reductions in claims costs”. In addition, in the first half of 2013 Admiral earned £7.3m in credit hire referral fees.
“Admiral notes that the UK Competition Commission is undertaking a review of the car insurance market and a potential outcome of the review is regulatory change resulting in a reduction or elimination of these fees. Admiral expects any such reduction in revenue would be offset by reductions in claims costs.”
In April Admiral entered into separate ABS joint ventures with law firms Lyons Davidson and Cordner Lewis to form Admiral Law and BDE Law respectively.
“Bringing the provision of legal services into the group will allow Admiral to administer a claim throughout the process and offer a materially better quality of service,” it said.
Overall, Admiral recorded profits before tax up 6% to £181m against a 7% fall in turnover to £1.09bn.
Chief executive Henry Engelhardt said: “I’m really pleased with our results in the first half of 2013. Any time you can increase profits by 6% when competitors are cutting prices you’ve got to be happy.
“We didn’t grow the UK insurance business, which was great news because of the competitive environment. We were able to increase profits largely due to excellent claims experience.”