Claims firms wiped out by shake-up

A third of claims management firms have been wiped out by a Government clampdown on the sector – including a ban on so-called referral fees from insurers selling on claims data – according to figures published by the Ministry of Justice.
The marketing strategies of firms in the sector have been widely criticised in DM industry circles, especially the use of SMS and contact centres.
A recent Which? report found that one in four people who made a claim on their car insurance were contacted by a claims management company within three months. Nearly half of these were contacted in a week, and many were bombarded by repeated calls and texts – 22% received 10 or more texts and 12% received 10 or more calls.
As of June, there are now 1,700 claims management companies registered to pursue compensation for injuries, down 735 or 30% on March last year. Even though the change in the law only came in in April, it seems many have shut up shop in anticipiation.
As well as referral fees being banned, successful claimants are no longer able to keep any damages awarded in full. Under the new rules, people making a claim have to pay the success fee themselves if they win the case, although it can be no more than a quarter of the compensation they are granted.
The Government’s Claims Management Regulation unit, which oversees firms that handle claims for injuries and issues such as missold payment protection insurance (PPI), shut down 211 companies in the past year and issued formal warnings to 285 others.
Helen Grant, the Justice Minister, said: “We have taken strong action to rein in the rogue firms which have gathered in this sector and the impact is now starting to show.
“Ending these fees which fuelled a growing compensation culture has been an important step to reducing the cost of living for ordinary people, who have ultimately been footing the bill for them through their insurance premiums.”

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