A proposed FCA crackdown on Claims Management Companies (CMCs) is welcome news for insurers and law firms, according to Kella Bowers, Head of Insurance at national law firm Forbes Solicitors.
New FCA review
The FCA is undertaking a market-wide review of CMCs, acting on concerns that consumers are being failed by some unscrupulous companies. Aggressive marketing practices, misleading advertising and unfair exit fees will all be scrutinised, as the regulator continues to review and supervise claims management services to ensure they support customer choice, promote effective competition and serve consumers.
In January 2025, the FCA set out its strategy for CMCs, which provided an updated view of the harms and risks posed by such companies, and the expectations for firms in this sector. The regulator has been clear that CMCs must be trusted providers of high-quality, good-value services that help people to pursue legitimate claims for redress and benefit public interest.
Unfortunately, these expectations are being tested, with questionable parts of the civil claims sector walking a fine line between access to justice and opportunism. It has been previously reported that mis-sold Payment Protection Insurance (PPI) redress has cost the industry more than £50billion. Furthermore, millions of drivers mis-sold car finance may be entitled to average payouts of £829 per finance agreement, meaning billions of pounds could be paid in compensation.
Such financial sums seem to have attracted ‘financial ambulance chasers’, which prioritise a quick buck by generating a high volume and velocity of claims. It’s doubtful this approach meets the expectations of the FCA or effectively serves the interests of anyone other than the firms wanting to make the most profit for the least effort.
Studying fair outcomes
As of early June 2026, a market study is being carried out by the FCA. This is focusing on claims management services provided in relation to financial services and financial product claims and housing disrepair claims. The latter is an area that’s also attracted the attention of the Regulator of Social Housing. It noted in a report in July 2025 that some ‘no win, no fee’ legal firms were allegedly advising social housing tenants to restrict access to their homes, when access was required for housing condition surveys and repair works. It’s believed this fuels health-related claims linked to housing conditions.
The FCA is working closely with the Solicitors Regulation Authority (SRA) to carry out the market study. This will help gather views and evidence about consumer journeys during claims management processes, pricing related harms, business model incentives, risks created by low financial resilience in CMCs and incentives created by the regulatory landscape. Observations and considerations across these areas will enable the FCA to determine whether CMC business models and practices are compatible with delivering fair outcomes. This is likely to examine how claims are sourced, how fees are structured and whether any incentives push firms toward behaviour that prioritises lead generation over other forms of activity.
Examination of information gathered in the market study will likely question whether consumers (claimants) fully understand their participation and journey in the claims process. Did they know what they were signing up for and why? Did they actually consent to pursuing a claim? Is a claimant fully aware of the financial redress they are entitled to, versus what they will be repaid after a CMC has taken its cut of any compensation?
Concerns have been noted by the FCA that consumers are signed up without clear, upfront explanations of the implications of what they are agreeing to. Similarly, social media is likely being weaponised by dubious operators to target consumers and generate huge volumes of claims.
Eliminating meritless claims
The market study covers all current and potential suppliers of claims management services, including those regulated by the SRA, the Bar Standards Board, CILEx Regulation and the Law Society of Scotland. It will also involve firms that provide lead generation services, consumers, financial services firms that have had claims made against them by CMCs and investors in CMCs.
It has been made clear by the FCA that it expects full, prompt and open cooperation from all parties engaged in the study. Any obstructions will be subject to robust action from the FCA and its regulatory and enforcement partners.
Outcomes from the study could inform recommendations to government, legislative change and stronger compensation mechanisms for CMCs, which are failing consumers and causing harm. This is welcome news for insurers and law firms. Sadly, too many questionable practices and companies are eroding trust and damaging the economy.
The SRA recognises that CMCs can benefit consumers, but that this isn’t always case. Addressing concerns could help improve industry standards, boosting integrity and quality by clamping down on misleading advertising and sign-up practices, and eliminating meritless claims and speculative claims harvesting. These actions would create a welcome dead end for ‘financial ambulance chasers’.
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