Ben Howarth, Policy Adviser, Motor & Liability, ABIAt some stage, almost everyone will have been phoned or received a text message encouraging them to claim for compensation, often for a personal injury or for PPI.
A recent ABI survey shows that 83% of people have been contacted by a claims management company (CMC) in this way. Alarmingly, 92% of those were called despite not having been in an accident or taken out a relevant policy. This encourages unwarranted, unsubstantiated and even fraudulent claims – pushing up the cost of insurance for honest customers.
The torrent of nuisance calls and texts is a symptom of much deeper problems associated with our ‘compensation culture’. In 2014, the Claims Management Regulator struck off 105 CMCs and issued warnings to a further 296. That’s 23% of the sector falling well short of the minimum standards.
Regulation by the FCA
The Claims Management Regulator is doing its best with the tools available, but a small unit within a Government department is no substitute for an experienced and well-resourced regulator.
Now is the right time for the Financial Conduct Authority to take regulation of CMCs on.
You might ask why a financial regulator should regulate claims management. The primary factors driving poor behaviour by CMCs are financial, and the financial firms the FCA already regulates are most affected by poor claims management behaviour.
Put simply, the regulator needs to follow the money through the insurance claims process. The FCA is the ideal regulator to make sure this market acts in the interest of consumers and does not distort competition.
Promoting good conduct
Too often, claims management companies fail to be transparent about the fees they charge customers and the money they make from passing claimants on to commercial partners. Many don’t substantiate claims properly, and, most worryingly, push claims through even when it is clearly not in the claimants’ best interests to do so. All of which increases insurance premiums for honest customers.
Rogue CMCs are also pushing through fraudulent claims. More than half of the Insurance Fraud Bureau’s live investigations feature a CMC.
This has to stop. When someone is caught handling unsubstantiated or fraudulent claims, they must lose their accreditation - they can’t just resurface at a new claims management company.
With her independent review, to which the ABI has submitted evidence, Carol Brady has an excellent opportunity to protect the public from rogue claims management companies – and hopefully, we’ll begin to see the annoying nuisance calls reduce as a result.
For more information, see the ABI's response to the call for evidence on the regulation of Claims Management Companies (CMCs).
Ben Howarth is Policy Adviser, Motor & Liability, ABI