The French insurance company Axa has spoken out against plans by its rivals to branch into offering legal services as part of their range of products.
Motor insurance firms and other businesses are now free to apply to sell legal services following on from changes brought in by the Legal Services Act 2007, which allows non-law businesses to offer legal services for the first time.
The news comes as Direct Line, which is launching on the London Stock Exchange this week, also prepare to announce that they will soon apply to sell legal services.
Axa's chief executive Paul Evans believes that insurance companies selling legal services is no better than referral fees in personal injury lawyers.
"The reputational risks are high because we [the industry] are trying to simply replace referral fees with an alternative model which isn't in the interests of consumers," he told The Financial Times.
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 will come into force in April 2013, outlawing the payment of referral fees in personal injury cases. The impact of the ban will be felt across the industry, with personal injury firms and insurers looking to tie up services to mitigate the effect of the new law.
The new law will outlaw the practice of personal injury lawyers paying referral fees to insurers for the contact details of those involved in accidents they did not cause. Lawyers traditionally then pursued the victims to see if they wanted to make a claim for compensation through them.
Axa was one of the first insurance companies to voluntarily stop receiving referral fees, a move which it claims has put them at a commercial disadvantage over other firms who are waiting for the law to take effect.
Axa hits at plan to offer legal services (The Financial Times - free signup)