The transfer of claims management company (CMC) regulation to the Financial Conduct Authority (FCA) in 2019 was intended to bring order to a sector whose worst practices were deemed to be causing consumer detriment as well as a source of irritating nuisance calls.
The number of CMCs was already well in decline. It had hit a record of 3,213 firms in March 2011, as revealed by that year’s annual report from the Claims Management Regulator, whose responsibilities the FCA took on. By 2019, there were 1,238 in operation.
By July 2023, FCA data seen by ACSO show that figure had fallen to just 546, an 80 per cent drop since the peak. Of those, 48 per cent (262), provide advice, investigation and representation, while the remaining 52 per cent (284) are lead generators only.
The most numerous variety of CMCs used to be involved in personal injury. In 2011, the combined number of personal injury advice and lead-generation CMCs reached a high of 2,553. Today, of those providing advice, only 30 cover personal injury.
ACSO has always believed that well-managed CMCs can offer consumers choice and access to justice that might otherwise be denied to them. Yet a combination of more robust regulation as well impacts such as the government’s whiplash reforms mean CMCs are essentially being consigned to history, at least where personal injury is concerned.
A good example is road traffic claims, with Official Injury Claim data showing a mere 0.3 per cent of consumers using the portal appoint CMCs.
It could be that ministers will hail this as a victory, but it also fits within a wider pattern of continuing reduction in organisations across the sector – CMCs, law firms and others - who support people when making a claim. That is a situation that needs careful monitoring to ensure people can get the help they need when seeking redress.
Before the new portal came into operation, there were even concerns expressed from some in the insurance industry that it would become a ‘CMCs’ charter.’ These fears have proved to be about as wide of the mark as it is possible to be.