Chalk: Consumer power will drive down premiums
The number of claims management companies (CMCs) continues to fall year on year and has dropped 80% over the past decade, new figures have shown.
Meanwhile, the whiplash regulations sailed through the first stage of their approval in the House of Commons ahead of them coming into force on 31 May.
Figures provided by the Financial Conduct Authority (FCA) showed that it currently regulates 623 CMCs, down from a high of 3,213 in 2011. There were 1,238 the year before the FCA took over the regulation of CMCs in April 2019.
Under the FCA regime, CMCs that just refer claims in any or all of the six regulated areas only need one permission. They are personal injury, financial services, housing disrepair, criminal injury, employment, and industrial injuries disablement benefit. Some 525 CMCs have this permission.
But if a CMC wants to go beyond lead generation and “advise, investigate and represent”, then they need specific permissions for each of the areas in which they want to operate.
Financial services is the main area for this – 232 CMCs have permissions, following by 47 for employment claims and just 24 in personal injury.
This may increase as CMCs look to handle whiplash claims for litigants in person under the new regime in the same way many do for financial mis-selling claims.
The numbers exclude any companies that are regulated for other activities, such as general insurance intermediaries, and also have claims management permissions.
Last October, the FCA said [1] many CMCs have shown “a poor understanding of, and sometimes attitude to, their regulatory obligations”.
After the whiplash regulations were approved by the House of Lords on Monday [2], they were considered and passed by the House of Lords’ seventh delegated legislation committee.
Asked how likely it was that insurers would pass on the savings they would make from the reforms, justice minister Alex Chalk pointed to how premiums have gone down during the pandemic with less use of cars, under pressure from consumers, as an indicator of the “likely behavioural response”.
Citing figures from Confused.com and the Association of British Insurers about how premiums have fallen, he said: “We can take increasing confidence that there will be consumer power to drive down these premiums.”
The regulations have still to be approved by the House of Commons itself but there is no doubt that this will happen.
Meanwhile, the government’s decision on Monday to increase the small claims limit for non-road traffic personal injury claims to £1,500, rather than £2,000 as originally planned, was still not enough for trade union law firm Thompsons.
Gerard Stilliard, head of personal injury strategy, reacted: “This gratuitous move has come from a government that doesn’t really care for hardworking people injured through no fault of their own and fighting to keep their head above the water in an economy rocked by the pandemic.
“£1,500 is a significant sum to those who have kept us going through the pandemic. From April 2022 many of the lowest paid will no longer be able to draw on the support of independent legal advice and will face taking on the financial and administrative burden of making a claim alone in a poorly resourced county court with overwhelmed judges, against the unlimited might of the insurance industry.
“Many will not proceed, as they simply won’t have the time or means to access the justice they deserve…
“[The Conservatives] have chosen to sacrifice workers’ rights to deliver yet more profit to their friends in the insurance industry and send a message to bad employers with poor health and safety records: the government is on your side.”
Qamar Anwar, managing director of First4Lawyers, described the decision as “a significant, if belated, sign of progress” that made the unfairness of the £5,000 limit for road traffic injuries “even starker”.
He added: “Such a disparity cannot be justified. It is still not too late for ministers to rethink this damaging policy, the only beneficiaries of which will be insurance company shareholders and bosses.
“We urge them to use the breathing space given to non-RTA claims, to April 2022, to re-engage with the industry to find a fair solution.”