There is little evidence to date that claims management companies (CMCs) are actively targeting the personal injury sector following the launch of the government’s Official Injury Claim (OIC) portal in May last year. A new report from the Association of Consumer Support Organisations (ACSO), which represents the interests of consumers in the civil justice system, notes that of more than 114,000 claims logged with the OIC so far, only 209 were represented by a CMC.
Matthew Maxwell Scott, executive director of ACSO, said: “Some industry figures, both among insurers and claimant firms, warned that the OIC would give ‘claims farmers… a huge opening as it [the OIC] will be a substantial area to move into.’
“Instead, the evidence points to a sector that is evolving under a robust regulatory regime to become a legitimate provider of access to justice for consumers.”
He pointed to the following data in the report to support his contention:
1. A substantial fall in cold calling. The latest data from the Information Commissioner (ICO) found that of a total of 43,303 nuisance calls and texts recorded in Q1 2021, only 5 per cent (2,158) were accident management calls and texts, itself a 72 per cent decrease on the previous quarter.
2. A big reduction in overall CMC numbers, from a high point of 3,213 in 2011, to 668 in February 2021.
3. Falling complaints to the Financial Ombudsman (FOS) about CMCs. In 2020/21, FOS received a total of 1,113 complaints about CMCs, approximately 14 per cent less than predicted. Of these, 750 complaints related to PPI and only 230 to accident management.
4. The headline number of motor-related injury claims has fallen by 40 per cent during the last three years, reducing the incentive for CMCs to enter this market.
Maxwell Scott said that well governed and effectively regulated CMCs have a legitimate role to play in helping consumers gain access to justice, and it was wrong to “throw brickbats at an entire sector.”
“There is little doubt that CMCs have plenty of work to do to build consumer trust, and there remains a potential risk from unregulated CMCs seeking to game the system. However, individual authorised firms are subject to ongoing checks to ensure they are meeting the FCA’s required standards and complying with rules., and the regulator has a wide range of powers to deal with misconduct.”
Maxwell Scott noted that the FCA intended to implement new rules on phoenixing (when individuals connected to a wound-up financial services provider later reappear in connection with a CMC and charge consumers for seeking compensation against their former firm’s poor conduct), and ongoing monitoring of fees.
He said: “We also have ongoing concerns about ‘spoof advertising,’ where claims companies imply that they are linked to, or even part of, an insurer to capture customers seeking to contact their insurer following an accident.
“The FCA’s new rules on restricting claims management charges for financial products and services claims are implemented from 1 March, so it remains possible that CMCs will leave the market, move to offer different services, or change the way they set their fees. We are nevertheless confident the FCA has a robust monitoring regime in place and will clamp down hard, and early, on unacceptable behaviour.”
Maxwell Scott said that CMCs “are clearly on a journey, but the industry should acknowledge the benefits of FCA regulation are beginning to bear fruit. The sector should be given the benefit of the doubt as it continues to clean up its act to become a legitimate force protecting the rights of consumers of seek redress through the justice system.”