In England and Wales, a claims management company is a business that offers claims management services to the public. Claims management services consist of advice or services in respect of claims for compensation, restitution, repayment or any other remedy for loss or damage, or in respect of some other obligation. Claims management services cover litigation, or claims under regulation schemes or voluntary arrangements.[1]
The abolition of legal aid for personal injury claims, the introduction of conditional fee agreements and the appearance of and growth in claims management companies led to a rapid expansion of litigation from the mid-1990s. This led to public concern at the development of a "compensation culture". The collapse of claims management company the Accident Group in 2003 increased disquiet with the system. Such companies used aggressive sales techniques and exaggerated claims, profiting from exorbitant commissions on after the event insurance policies. It was estimated that there were about 1,000 such companies in the UK in 2003.[2] However, there was still evidence that many meritorious claims were discouraged by the difficulties and costs of litigation.[3] These concerns, especially around the operation of conditional fee agreements, led to regulation of the market by Part 2 of the Compensation Act 2006.[4][5] The activities regulated are those common to the market and which had caused concern:[6]
— in respect of claims:
In England and Wales, as of 23 April 2007, an individual or a corporation may not, unless exempt or otherwise in receipt of a waiver, provide claims management services by way of business unless authorised by the Claims Management Services Regulator.[8][9] It is a crime for an unauthorised person to provide or offer claims management services, or to pretend to be authorised. Offenders are punishable, on summary conviction, by a fine of up to level 5 on the standard scale or 51 weeks' imprisonment. If convicted on indictment in the Crown Court, offenders can be sentenced to an unlimited fine or two years' imprisonment.[10][11] Where a corporate crime is committed, the offender can only be fined and not imprisoned. The claims regulator also covers the processing and evaluation of complaints against claims management companies.[12]
Solicitors, barristers, advocates and some other lawyers are exempt, as are:[13]
Incidental referrals to lawyers are also exempt[13] as are services in respect of counterclaims, or claims for contribution or indemnity.[14]
The Claims Management Services Regulator was created by section 11 of the Compensation Act 2006.[15] The post of Regulator was held by the Secretary of State for Justice to authorise and regulate claims management companies and:[16]
The rules and procedure for authorisation are defined in the Compensation (Claims Management Services) Regulations 2006.[17] The Regulator may investigate unauthorised trading and seek an injunction to prevent it or bring a criminal prosecution.[18] It is a crime to obstruct the Regulator, punishable on summary conviction by a fine of up to level 5 on the standard scale.[19]
A person may appeal a decision of the Regulator about authorisation to the Claims Management Services Tribunal and there is a further route of appeal to the Court of Appeal.[20]
When section 161 of the Legal Services Act 2007 comes into force, claims management services and the Regulator will fall under the supervision of the Office for Legal Complaints and its ombudsman scheme. It has been suggested that the first complaints will not be handled until 2010.[21]
The Claims Management Services Tribunal was created by section 12 of the Compensation Act 2006 to hear:[20]
In January 2010 the Tribunal was abolished and its functions transferred to the First-tier Tribunal.
On 1 April 2019, regulation of claims management companies was transferred to the Financial Conduct Authority. Claims management companies previously regulated by the Claims Management Services Regulator, and that wished to continue trading, had to register for temporary permission by 31 March 2019.[22]