CMCs have not exploited whiplash portal, report says

Maxwell Scott: Wrong to throw brickbats at an entire sector

Fears that unscrupulous claims management companies (CMCs) would take advantage of injured people bringing claims through whiplash portal have proven unfounded, a report has found.

Matthew Maxwell Scott, executive director of the Association of Consumer Support Organisations (ACSO), said the evidence pointed not to bad behaviour but instead to “a sector that is evolving under a robust regulatory regime” to become a legitimate provider.

In a report on the CMC sector in England and Wales, ACSO said that of more than 114,000 claims logged with the Official Injury Claim (OIC) portal since it began on 31 May 2021, only 209 were represented by CMCs.

“Since the launch of the OIC portal, there has been no evidence to suggest that there has been an increase in poor behaviour by CMCs, whether regulated or unregulated, and there are several reasons why it is unlikely to emerge.”

Researchers said there had been a “considerable reduction in the number of authorised CMCs, thereby reducing the number of disreputable market players”.

The number of CMCs authorised so far by the Financial Conduct Authority (FCA) – which took over from the Claims Management Regulator at the Ministry of Justice in April 2019 – was 668. There were 3,213 at the high point in 2011.

The report said the FCA had more robust supervision and enforcement mechanisms than its predecessor.

A further factor was a 40% fall in motor injury claims over the past three years, “meaning there is less incentive for CMCs to enter the market”.

There had also been a “substantial fall” in the number of accident-related nuisance calls and texts recorded by the Information Commissioner’s Office, from over 25,000 in 2017 to 5,902 in 2021, a decline of 77%.

There was also a drop in the number of complaints about CMCs to the Financial Ombudsman Service. Of the 278,000 new claims the service received in the financial year 2020/21, less than 1% related to CMCs.

And of those 1,113 complaints, only 230 related to accident management; the majority were about financial services.

Mr Maxwell Scott said some industry figures, “both among insurers and claimant firms”, warned that the OIC would give CMCs a “huge opening” to move into, but it had not happened.

He said that well-governed and effectively regulated CMCs had a legitimate role to play, and it was wrong to “throw brickbats at an entire sector.”

He went on: “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.”

He noted that the FCA’s new regime restricting claims management charges for financial products claims is being implemented today, “so it remained possible that CMCs will leave the market, move to offer different services, or change the way they set their fees”.

But he added: “We are nevertheless confident the FCA has a robust monitoring regime in place and will clamp down hard, and early, on unacceptable behaviour.”

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