FCA & CMCs – regulator calls on CMCs to improve advertising behaviours

On Friday 23 August the FCA issued a fairly sharply-worded press release entitled ‘Claims Management Companies must raise advertising standards’, which begins with a summary of the rules which the regulator will apply when considering advertising material used by CMCs.

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Summer Budget 2015: “action to make sure that consumers get a better deal”

The Chancellor used this phrase in introducing the part of his budget speech that covers insurance. The budget materials point to close liaison between Treasury and the Ministry of Justice, in that they:

  • announce a fundamental review of the regulation of claims management companies, reporting to both Treasury & MoJ, and
  • reconfirm that the Insurance Fraud Task Force will report to both these departments by the end of the year.

The less welcome news for insurance customers is a 50+% increase in IPT (Insurance Premium Tax). In November, the rate will go up from 6% to 9.5% of premium charged.

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Where next for claims management regulation?

On 4 June, the Westminster Legal Policy Forum held an event: “The future of the claims management sector – regulation, standards and growth”. Lord Hunt of the Wirral chaired the first session. He said he was lucky to be attending because, according to an unsolicited phone call received from a CMC, he had been involved in an accident in which he had been injured.

There were two keynote speakers: Kevin Rousell, Head of Claims Management Regulation (CMR) at the Ministry of Justice and Crispin Passmore of the Solicitors Regulation Authority.

Kevin Rousell set out the four main compliance priorities in relation to Claims Management Companies for the CMR in 2015:

  1. Nuisance calls – unsolicited contact by telephone or text message.
  2. Financial products & services – evidence that there is a lack of diligence in submitting claims.
  3. Personal injury claims – ‘crash for cash’ and fraud.
  4. Unauthorised activities – non authorised CMCs working ‘underground’.

About 1,600 CMCs dealing with personal injury claims had left the sector in the past two years, probably because of LASPO and tighter regulation. The long-term aim was for Government to continue its drive towards deregulation and for CMCs to self-regulate. Until such time, however, this area of work is certainly being taken seriously by the MoJ, with 110 staff employed across the CMR team. Its annual report for 2014/15 is due to be published in July.

Crispin Passmore talked about referral fees and was concerned that these should not be dressed up [by unscrupulous companies] as something different to get round the ban. He also mentioned fairly widespread concerns with regard to noise-induced hearing loss (NIHL) claims but added that the SRA had only 50 cases relating to NHIL reported to it from January 2013 to March 2015.

A speaker from the Financial Ombudsman Service said that at their peak, complaints received had reached 15,000 per week. That had since reduced to around 4,000. It appeared that complaints about packaged / bundled bank accounts were also now being made. The Legal Ombudsman had been investigating complaints about CMCs since January 2015. The two areas of greatest concern were complaints about the level of fee information and updating on progress of claims. It was reported that one individual had been involved in 148 CMCs, including liquidating and then re-starting some outfits.

A timely event that showed that cracking down nuisance calls is finally being taken seriously by regulators. We will revisit these issues when the MoJ’s CMR report is publish in a few weeks.

About the author

Jef Mitchell is a consultant at BLM and former Chief Claims Officer at the Ministry of Defence where he regularly briefed Ministers on claims issues and risk management. He now helps to lead the firm’s Policy and Government Affairs work with Alistair Kinley preparing submissions and supporting evidence for consultations and reform proposals, in addition to liaising with government departments and regulators on key issues and consultations affecting the firm and its clients. Jef is also an accredited mediator.