The Association of British Insurers (ABI) has called for the Financial Conduct Authority (FCA) to be appointed as the regulatory body responsible for claims management companies (CMCs), following the current system failing to provide enough barriers to rogue businesses.
The ABI discovered that 23% of CMCs were either warned or had their authorisation cancelled in 2014/15, compared to the 18% in the previous years of 2012/13.
Martin Milliner, claims director at LV, explained: “It’s not surprising that the number of CMCs being warned or actioned has increased since last year. With complaints about cold calling from consumers rising by 12% year on year, the Claims Management Regulator had to respond.”
The ABI has called for more effective sanctions against any CMC employee found guilty of serious breaches for CMCs to be obliged to declare the source of the claims they submit.
Adrian Furnace, claims director at Covéa Insurance, also agreed that there is a need for more effective regulation of the sector.
Heather Wheeler MP, chair of the All Party Parliamentary Group for Insurance and Financial Services, commented on the situation: “We can have a conversation with the Ministry of Justice about how we can help them to actually outlaw these sorts of things and make examples of rogue firms.”
A Ministry of Justice spokesman said: “The government is cracking down on this malpractice. We are doing all we can to get consumers a fairer deal and rid the industry of rogue behaviour.”
Rob Cummings, insurance manager of ABI, said: “No one should be pressured into making a compensation claim. For too long some CMCs have helped fuel a compensation culture through nuisance calls, misleading adverts and high charges. By encouraging frivolous and fraudulent claims their actions have led to higher insurance premiums for honest customers.”
He then added: “Tougher supervision should drive the cowboy operators out of town and ensure that honest customer do not end up footing the bill for the rogue firms.”