Justice minister Jonathan Djanogly is content to see claims management companies (CMCs) forge closer ties with solicitors once the referral fee ban for personal injury cases has been introduced.

Speaking at a Commons transport committee meeting on Tuesday on the cost of motor insurance, Djanogly said he is aware that the new era of alternative business structures offers a way for CMCs to get around the effects of a ban.

But the minister is content for claims managers to combine with solicitors if it means they will come under solicitors’ regulation standards. CMCs are currently regulated by the Ministry of Justice.

Djanogly said: 'There will be a significant number of claims management companies who realise our proposals are going to significantly curtail their business, who will look to join with solicitors.

'They will become the advertising arm of the law firm, which will become possible with the proposals. From a regulatory perspective that would be advantageous - the claims management companies would be regulated by the Solicitors Regulation Authority. I don’t fear that as a move, I would encourage it.’

Djanogly said the need to prove cases beyond all reasonable doubt is likely to prevent the payment of referral fees becoming a criminal offence, a recommendation made in a recent bill proposed by former justice secretary Jack Straw.

The minister said he is pressing for a ban on referral fees to be included as part of the Legal Aid, Sentencing and Punishment of Offenders Bill, which is about to have its third reading in the House of Commons.

Djanogly reiterated his hope that reform will ensure claimants 'have an interest' in what they are paying their lawyer and will encourage defendant parties to contest claims, particularly for whiplash cases.

'Defendants have been too readily enticed to settle too easily - we want to create an atmosphere where the insurance defendants will want to defend more readily and from a government point of view we encourage them to do so.’

Earlier in the session, Straw had continued his ongoing attack on referral fees and the legal profession’s involvement with them, saying there are too many 'dodgy solicitor firms part of this racket'.

He added: 'I go down to the end of my street in Blackburn and there are two firms offering £600 for referrals - and so the whole thing spirals.’

Paul Evans, chief executive of insurance firm AXA, which stopped paying referral fees in the summer, welcomed Straw’s call for fixed fees in the RTA Portal to be cut.

'If the fixed fee is reduced, the personal injury dilemma will go away, I promise; and premiums will fall as it’s a very competitive marketplace.’