Background
28.The Better Regulation Task Force (BRTF) report: Better Routes to Redress published in May 2004 found that the “compensation culture” is a myth but that it is a damaging myth that needs to be tackled. The BRTF identified the activities of claims intermediaries as contributing to a ‘have a go culture’ and recommended that claims intermediaries should be subject to statutory regulation, if self-regulation did not work.
29.One of the concerns identified by the BRTF was that while there were established complaints mechanisms and bodies to help people who are unhappy with the way they have been treated by solicitors or insurers, there has been no clear-cut equivalent in the case of claims intermediaries. It has been suggested that as a result, more claims for redress have been brought against solicitors and insurers because there has been no regulatory way to proceed against anyone else.
30.The Government published a consultation and responses paper on the simplification of conditional fee agreements (CFAs) in June 2004 Making Simple CFAs a Reality which included a discussion of the widespread concern over claims intermediaries’ activities and work underway to try to produce a self regulatory solution. The Government responded to the BRTF’s report in November 2004 accepting the recommendation that regulation of claims intermediaries should be considered if self-regulation failed.
31.The legislative framework is flexible and allows the Secretary of State to designate a body to regulate claims management services, to establish a body to regulate (where he thinks that no existing body is suitable for designation) or to regulate himself. The Act provides the outline regulatory framework to authorise providers who would be required to comply with rules and codes of practice. The Act also includes power for the Regulator to investigate unauthorised activities and to prosecute those who try to evade regulation.
32.If the Secretary of State designates a body to regulate claims management services he will retain oversight responsibility for the body. He will have the power to issue directions, provide guidance, require the body to try to meet regulatory targets and to provide information on its regulatory responsibility. It is anticipated that the regulation of claims management services will in due course be integrated into the proposed new regulatory framework for legal services set out in the Draft Legal Services Bill (Cm 6839).