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My Lords, I thank my noble friend Lord Thomas and the noble Lord, Lord Dubs, for introducing the matter. I also thank the noble Lords, Lord Neill and Lord Bach, for their contributions. Part of the latter's contribution was a warm-up for the further debate that we will have on referral fees, and I will make two points about his comments. First, he said that the insurance industry was trapped in practices that drive up premiums. That would be fine if the insurance industry paid the penalty for that merry-go-round, but the reason that there is so much indignation is that the cost falls on the poor consumer. That is why there seems not to be much incentive in the industry to deal with this; companies casually pass on increased costs to the consumer, as we have seen with the escalation of insurance premiums in this area. Secondly, I join my right honourable friend the Prime Minister in praising the road traffic accident portal, which is working extremely well and we are actively looking at where else it could be applied.
As my noble friend Lord Thomas and the noble Lord, Lord Dubs, explained, Amendments 164 and 164ZA would prohibit an insurer making an unsolicited approach to potential claimants in a personal injury case if the insurer was aware that the claimant had legal representation. The amendments also specify the requirements that must be met before an insurer may make an offer to settle such a claim where a claimant does not have, or is thought not to have, legal representation. This includes a requirement to obtain adequate medical evidence of the injury and to advise the claimant of their right to obtain full legal advice before accepting the offer, and to make it clear to the claimant that the offer to settle is full and final. In either of these cases, a failure on the part of the insurer to observe the provisions would render any settlement void.
Third-party contact is the practice by insurers of making an early settlement offer to a claimant or third party where the insurer's policyholder is at fault in a car accident. The Financial Services Authority regulates the insurance industry and requires that insurers treat their customers fairly at all times. This would cover third-party claimants. I should explain that apparently the industry prefers the term "third-party contact" to "third-party capture". I will leave it to noble Lords to make their choice on that.