Osborne: CMCs face fundamental review and fees cap


George Osborne

Osborne: insurance premiums have gone down, so tax is going up

A “fundamental review” of claims management companies (CMCs) – along with a cap on the fees that they can charge consumers – was announced by Chancellor George Osborne in today’s Summer Budget.

In what he described as a “major review” of CMCs, Mr Osborne said fees would be capped, “reducing nuisance calls to potential customers”.

Noting that the cost of premiums had gone “down for families”, the chancellor also announced a hike of more than 50% in the standard rate of insurance premium tax, from 6% to 9.5%, in November this year.

The standard rate is charged on a range of insurance products, including ordinary motor insurance.

The Budget document said: “The government will reform the regulation of the claims management sector to help to drive out further unnecessary costs from insurance premiums.

“This Budget announces a fundamental review of the regulation of CMCs, led by the chairman of the Chartered Trading Standard Institute board Carol Brady, which will report to HM Treasury and the Ministry of Justice in early 2016.

“In addition, there is also a case for reform of the fees that CMCs charge consumers, particularly in those instances where consumer complaints fall within the remit of the Financial Ombudsman Service. Therefore, the government will bring forward proposals for the introduction of a cap on the charges that CMCs can apply to their customers, and will consult on how this will work in practice.

“This builds on the success of previous measures including the ban on referral fees and action to address fraudulent whiplash claims. The Insurance Fraud Taskforce will report by the end of 2015 on what can be done to reduce the impact of fraud on insurance premiums.”

Alan Nesbit, managing partner of the Nesbit Law Group and chairman of the Association of Regulated Claims Management Companies, said the capping of CMC fees had never been “mentioned or hinted at” by the government.

Mr Nesbit said it might be appropriate to cap CMC fees at a “reasonable or fixed rate”, particularly for PPI claims.

On personal injury claims, he said: “This sounds a bit like ‘tit for tat’ to me. I don’t see why solicitors should be capped and CMCs not. This could be a relevant way of controlling poor behaviour.

“Although it would be fine if the cap was set at a market rate, it would be patently unfair if the rate set was ridiculously low”.

Mr Nesbit said that, for insurance companies, it could be a case of “be careful what you wish for”, after all the savings they had made as a result of government changes to the personal injury market.

Russell Atkinson, chief executive of National Accident Helpline, commented: “We welcome the review into the regulation of CMCs to ensure that the whole industry adheres to professional and ethical standards.

“National Accident Helpline has been working hard to drive up standards in the sector, through initiatives such as our Stop Nuisance Calls campaigns, and has been working proactively with government through the Insurance Fraud Taskforce.

“We look forward to working with the government to ensure the practices of CMCs are in the best interest of consumers and access to justice is not impaired.”

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    Readers Comments

  • Paul Pavlou says:

    “The government will reform the regulation of the claims management sector to help to drive out further unnecessary costs from insurance premiums.”
    +
    The chancellor also announced a hike of more than 50% in the standard rate of insurance premium tax, from 6% to 9.5%, in November this year.

    Priceless.

  • p shaw says:

    Its the banks that should be punished not the CMC’s the proposed fees are ridiculous and will put 1000s of people out of work in this industry. If prople wish to use a CMC it is their choice.


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