Admiral Plans Legal Venture After Government Bans Referral Fees

Admiral Group Plc (ADM), the U.K. motor insurer that owns, started joint ventures with two law firms after the government banned the practice of selling details of customers who have been in an accident.

Admiral will form the partnerships with law firms Lyons Davidson and Cordner Lewis Solicitors beginning May 1, the Cardiff, Wales-based firm said today in a statement. The government on April 1 banned so-called referral fees paid to insurers.

Prime Minister David Cameron outlawed the fees as part of an attempt to bring down the cost of motor insurance, which has climbed by more than a third over the past four years as claims soared due to the success of lawyers working on contingency fees and spurious injuries. By bringing the legal services in-house, Admiral gets to maintain revenue from successful legal claims against other insurers.

“This is about protecting a revenue stream from law firms that has just become outlawed,” said Kevin Ryan, a London-based analyst at Investec Plc (INVP) with a sell rating on the stock. “The challenge will now be to charge the customer for using the service.”

The ventures will not make a “material contribution” to Admiral’s profit in the foreseeable future, the insurer said.

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