The number of claims management companies (CMCs) has fallen by 83% from its high point of 3,213 in March 2011 to just 546 now, new figures have revealed.
They are split almost equally between those that provide advice, investigation and representation, and those that solely act as lead generators.
At the point when the Financial Conduct Authority (FCA) took over CMC regulation from the Ministry of Justice in 2019, there were 1,238 CMCs operating, meaning a fall of 56% in the last four years.
The FCA figures were seen by the Association of Consumer Support Organisations (ACSO), whose executive director, Matthew Maxwell Scott, said only 30 of the 262 firms in the advice category covered personal injury. The FCA did not provide the number of lead generators.
In 2011, the combined number of personal injury advice and lead-generation CMCs reached a high of 2,553. CMCs now largely focus on financial and other regulated claims.
Mr Maxwell Scott said: “CMCs are essentially being consigned to history, at least where personal injury is concerned. Only a handful of companies remain in the market, and Official Injury Claim (OIC) data show only 0.3% of claimants using the portal appoint CMCs.
“Ministers will hail this as a victory, although we should be worried about the continuing reduction in organisations across the sector – CMCs, law firms and others – who support people when making a claim, because it is having increasing implications for access to justice and consumer choice.”
He added that “alarmist fears” that the OIC portal would reinvigorate CMCs “have proved to be about as wide of the mark as it’s possible to be”.
A recent FCA event for CMC stakeholders said there were report of a continued increase in CMC activity by solicitors’ firms, particularly those handling financial claims, “although some CMCs appear to be involved in generating and referring the leads to them”.
CMCs were also more active in housing disrepair, it said. “We have engaged with the Housing Ombudsman to discuss the recent increase in housing disrepair claims and concerns around the conduct of the firms bringing claims.
“While we have seen an increase in activity, CMCs are mainly involved as lead generators, with most claims being brought by SRA-regulated firms.”
The event heard too that the FCA was assessing the harm caused by CMCs using the ‘halo’ effect – “misleading adverts where firms are using the FCA authorisation to legitimise their unregulated activity”, particularly in financial and tax claims.
More positively, consumer contacts regarding CMC activity has continued to fall, down to 276 in the last six months, from 321 in the previous six.
On financial claims, the event was told that the FCA recently held a workshop with the Financial Services Compensation Scheme, Financial Ombudsman Service, Solicitors Regulation Authority and Pensions Ombudsman in a bid to agree “a joint approach to increase consumers’ awareness and encourage consumers to make a claim only when fully informed of their choices”.
Separately, the FCA’s Financial Lives Survey showed that 57% of consumers who made a claim in the last three years and used a CMC for their most recent claim considered that the service provided met their expectations and 39% considered that the fee paid was fair.
“This is the first time we have collected this data. We will continue to monitor this. If CMCs are doing a good job, we would expect more of the complaints CMCs pursue to be upheld by the Financial Ombudsman Service.
“In 2022/23, it upheld 47% of complaints made through FCA-regulated CMCs, compared to 30% in 2021/22.”