The move follows on the Office of Fair Trading launching an investigation in to car insurance costs that looks at whether charges and prices rises are fair to motorists.
The latest ban has badly hit car insurer Admiral, which reportedly earned £147 million last year from selling driver’s details to personal injury lawyers.
The practise is estimated to add up to £30 a year on to the cost of every driver’s insurance.
Announcing the ban, Justice Minister Jonathan Djanogly said: “The ‘no-win, no-fee’ system is pushing us into a compensation culture in which middle men make a tidy profit which the rest of us end up paying for through higher insurance premiums and higher prices
“We will ban referral fees and we will go further. We have proposals before Parliament to end the bizarre situation in which people have no stake in the legal costs their cases bring. This will make claimants think harder about whether to sue and give insurance companies and business generally an incentive to pass the savings onto customers through lower prices.”
The ban will be written in to a new law currently passing thorough Parliament and wis expected to come in to force next year.
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