It is generally known that the scandalous practice of companies claiming referral fees for details of accident victims is driving up our insurance premiums.

However it is now clear that they are also a huge incentive to stage accidents, so that criminals can then claim the referral fees from insurance companies. Last week, Masi Naqshbandi was found guilty at Croydon Crown Court of staging more than 250 crashes in order to fraudulently claim referral fees from solicitors, at a cost of £6.5 million.

Naqshbandi staged more than 250 crashes and then claimed the referral fees for his firm, Real Accident Helpline Limited. Naqshbandi’s imprisonment of 7 years and 3 months is the highest ‘crash for cash’ sentence to date. In 2009, Hussein Hassani was imprisoned for 4 years for his role in staging over £3m of bogus road traffic accidents.

However the real scandal is that referral fees still exist. The way the system operates is that a claims management company will contact someone with a potential claim and then sell the details of that person to a personal injury lawyer. Those fees are thought to average over £750 – which means the lawyer is earning a much bigger profit than that (otherwise it would not be worth them paying the £750).

Jack Straw, the former Home Secretary, described the system as a “racket” but says he only found out about them after he left office. The current government originally refused to do anything about them and then said late last year it was planning to outlaw referral fees. However, it is now August 2012 and the fees still exist.

Meanwhile somewhere over £100 is being added to every car insurance premium to cover the cost of referral fees. Nice to know that your last insurance renewal kept some low-life in champagne.