22 May 2008
Cowboy claims companies have been forced to clean up their act, says a report published today.
The Ministry of Justice's first annual report says better regulation has significantly reduced cold calling in person, which includes the practice of 'clipboarding' - knocking on doors and aggressively approaching people in shopping centres. Unauthorised advertising and marketing in hospitals have also been almost entirely removed.
Bridget Prentice said:
'The regulation has put in place vital safeguards for consumers when using the services of claims management companies and is raising standards across the industry.
'The new rules that claim managers must now follow have cleaned up the industry. Consumers can have more confidence that they will be dealt with fairly when seeking to make a claim.
'I am delighted to present the first annual review for the Ministry of Justice Claims Management Regulation Unit.'
Those authorised to provide the regulated services must now follow strict rules of conduct. This will ensure that consumers are given clear information about the options available for pursuing their claim and the associated costs. If an authorised person fails to comply with the rules the regulator can take appropriate disciplinary action.
Other successes include a strategy developed to deal with outright fraud like contrived accidents and a significant reduction of malpractice by companies handling claims made to the Criminal Injuries Compensation Authority, with some businesses voluntarily leaving the market.
The speed in which regulation was introduced - nine months from Royal Assent to the Act being fully in force - and the success in raising awareness among businesses who would need to be authorised resulted in three times more businesses coming forward than had been anticipated. The flexibility in the legislation and the regulatory framework means we can respond to such demands quickly.
Notes for editors
1. The Compensation Act 2006 received Royal Assent on 25 July 2006. Part 2 of the Act establishes a statutory framework for the regulation of claims management services. It is now prohibited to provide the regulated services unless authorised or exempt. The Regulator has powers under the Act to take action against persons suspected of providing regulated services without authorisation, and against authorised persons suspected of breaching the rules or unprofessional conduct.
2. Once authorised, businesses will have to comply with strict rules of conduct including:
- a prohibition on cold calling in person
- a prohibition on high pressure selling
- transparent contracts
- disclosure of referral fees
- provide a comprehensive complaints procedure
3. The regulation will initially apply to claims in respect of:
- personal injury
- criminal injuries compensation
- housing disrepair
- financial products and services
- industrial injury disablement benefits
4. The designated Claims Management Regulation website provides guidance and comprehensive information on the authorisation process and other aspects of the regulation.
5. Following the formal tender exercise in summer 2006, Staffordshire County Council's Trading Standards Unit was selected to run the Monitoring and Compliance Unit for the regulation of claims management services on a three-year contract. The unit is based at 57-60 High Street, Burton-on-Trent, which has been processing applications for authorisation since November 2006.
6. Any further media enquiries on this news release should be directed to Alia Syed at the Ministry of Justice Press Office on 0207 210 8695.