Rousell: Excellent collaborative effort
Claims management companies (CMCs) are moving into property related complaints as the surge in holiday sickness claims has been brought under control, according to the Claims Management Regulator (CMR).
The CMR’s annual report showed that the sector’s turnover increased 5% to £763m, an increase entirely attributable to financial services CMCs.
The report said there has been an increase in activity in housing disrepair claims during the year, “which has formed part of a wider upward trend of property related complaints”.
These have included cavity wall insulation claims and claims about conditions of private rental properties, which generally do not fall within the current scope of CMC regulation.
It continued: “This growth occurred mainly during the second half of the year, coinciding with receipt of a rise in reports from local authorities and social housing providers about activities in this sector.
“Activities include reports of door-to-door canvassing, which is a breach of the conduct rules if seeking out potential housing disrepair clients.
“Although smaller in scale to holiday sickness claims, we are adopting a similar response by establishing contacts, sourcing intelligence and conducting a series of audits of CMCs operating in this claim area.”
These claims are one of the CMR’s priorities for the coming year – its last ahead of the transfer of regulation to the Financial Conduct Authority in April 2019.
The report said it would “closely monitor developments in the housing disrepair claims sector, to tackle non-compliant marketing, CMCs encouraging clients to submit false claims, unauthorised activity and other serious misconduct”.
It would also gather intelligence on activities in those claims not within the scope of the regime “as we come across it and share with relevant agencies”.
Holiday sickness was the big ‘growth’ area for CMCs over the past couple of years, but the report said “the misconduct in this sector has significantly reduced, as has the general level of holiday sickness claims activity”.
Whereas 225 CMCs said they did holiday sickness claims in August 2017, the number was down to 140 by January 2018.
The CMR, Kevin Rousell, wrote in the report that “an excellent collaborative effort with the Solicitors Regulation Authority, the Ministry of Justice and ABTA secured effective action to tackle the range of enablers, practices and costs incentives contributing to the surge in reported unmeritorious and fraudulent claims”.
From a high of 3,213 authorised CMCs in 2011, the falling number reached 1,238 in 2018 – 630 of these handed personal injury, down from 752 the year before.
“However, there remains a core of more established CMCs, with approximately two-thirds of CMCs having been regulated for more than five years,” the report said.
The total declared industry turnover for the 12 months to 30 November 2017 was £763m, an increase of 5%, but this masked turnover of financial claims CMCs rising 11% to £600m and of personal injury CMCs falling 14% to £157m – from a peak of over £450m in 2012.
The CMR attributed the rising income of financial CMCs to “increased public awareness through the FCA led advertising campaign regarding the PPI deadline and Plevin cases”.
The largest 25 CMCs accounted for 57% of all turnover – with the next 75 accounting for a further 27%.
The report noted that the CMR had focused on the “small number” of personal injury CMCs that have adopted different or less common operating models, such as entering into damages-based agreements (DBAs) with clients.
“These arrangements are regulated by specific regulations and result in the CMC receiving a proportion of the clients’ damages, rather than receiving payment from a solicitor.
“Few CMCs were able to demonstrate they could operate compliantly with the DBA regulations and the majority of CMCs discontinued this model, with some surrendering their authorisation and exiting the market entirely.”
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