Below par claims management companies (CMCs) better clean up if they don’t want to get the boot once the Financial Conduct Authority (FCA) takes over regulation in April 2019.
Publishing Claims management: how we will regulate claims management companies, the FCA has outlined what it sets out to do, the standards CMCs need to comply with, as well as the regulator’s response to feedback it got during an earlier consultation on draft rules and guidance for CMCs.
“We received several general comments from respondents about CMCs’ behaviour,” read the latest policy statement. “These included submitting multiple redundant claims, behaving unethically, and generally providing a poor service.
“We also had several comments from CMCs themselves about the behaviour of the firms dealing with claims. They reported how complaints went missing, letters of authority (LoAs) were lost or ignored, and claims were turned down without being fully investigated.”
The FCA noted that one of its objectives is to improve the professionalism of the sector – recognising the valuable service that CMCs offer especially to consumers in vulnerable circumstances. The watchdog wants these firms to be trusted providers who aid in pursuing legitimate claims for redress.
Starting the second quarter of next year, all CMCs set up or serving customers in England, Scotland, and Wales will have to be FCA-authorised, upon standards compliance, to continue operating legally.
“We’re ready to take over regulation on April 01, 2019,” said the FCA’s Jonathan Davidson, executive director of supervision – retail and authorisations. “The new regime aims to drive up standards in a sector whose reputation has been tarnished by some companies engaging in high pressure selling and by failing to provide clear information on the fees they charge.
“The new rules will ensure firms are transparent about their estimated fees before the customer signs on the dotted line, and notify customers of free statutory ombudsmen or compensation schemes. It’s vital that customers have the information they need to make informed decisions.”
Davidson stressed that they will take action against rule-breakers.
Commenting on the development, LV= general insurance claims director Martin Milliner said: “The new FCA rules should ensure that CMCs are held accountable to higher standards in future, and maximum ICO (Information Commissioner's Office) fines of £500k will stop slippery cold-call bosses avoiding punishment.
“The regulators are firing both barrels to quash a practice which has made many people’s lives a misery for years, so we fully support the largest fines for directors found to be falling foul of the law.”
