Justice minister Lord McNally has reiterated that the government has no intention of banning insurers from third-party capture.

Speaking during Wednesday’s House of Lords debate on civil litigation reform, McNally said there was no proof that accident victims were harmed by a direct approach from insurance companies to settle early. The subject has long been a grievance of personal injury solicitors who claim that early offers are often substantially lower than the claimant deserves and restrict the victim from seeking legal advice.

Insurers say the practice - which they term ‘third-party assistance’ - keeps costs low and that a voluntary code of conduct limits unsolicited contact.

Lord Thomas of Gresford, a Liberal Democrat peer, had tabled an amendment to the Legal Aid, Sentencing and Punishment of Offenders bill calling for the practice to be banned, but the government appears unmoved on the issue.

McNally said: ‘Third-party contact does not, in itself, cause detriment to consumers and may be to their advantage as a claim can often be resolved quickly.

‘In addition, this practice can allow insurers to reduce the legal costs associated with handling a claim, and this in turn reduces costs for all policyholders.’

He said he was aware of concerns about potential conflicts of interest, but pointed to a review by the Financial Services Authority in 2010 which found no conclusive evidence that unrepresented third parties could have achieved higher compensation had they obtained independent legal representation.

Thomas, who was asked to withdraw the motion, argued that claimants should be able to reopen the matter and seek legal advice if they have been ‘bought off’ by a settlement made in breach of the insurers’ code of conduct.

Later in the debate, McNally also rejected an amendment to exempt not-for-profit organisations from the ban on referral fees. This would cover charities and trade unions that receive sums from law firms for referring.

He said: ‘As a layman, I see referral fees as a distortion of the market, but there is nothing to stop trade unions having a good close working relationship with particular law firms. Some have had long-standing relationships.

‘However, I cannot tell the House that we are willing to make an exception.’

McNally added that payments by solicitors to other solicitors for the transfer of prescribed legal business are not likely to be covered by the ban.