Budget 2016: FCA to regulate claims management companies

Today's (16 March) Budget said the new regulatory regime will be tougher and will ensure CMC managers can be held personally accountable for the actions of their businesses.

The ABI last November called for the FCA to regulate CMCs.

ABI director general Huw Evans said in response to the Budget announcement: "Moving the regulator to the FCA, as the ABI has asked, is absolutely the right thing to do and a major reform."

"[The announcement] should go a long way in driving the cowboy operators out of town and helping to ensure honest customers don't end up footing the bill for their dodgy practices," Evans said.

Zurich UKGI CEO Vibhu Sharma said tighter regulation of CMCs would create a level playing field with the rest of the industry.

"For too long customers have been subject to unnecessary harassment from rogue businesses seeking to extort money from the industry," Sharma said.

Graeme Trudgill, British Insurance Brokers' Assocition executive director, added: "This decision is a giant step forward in reducing fraud and creating a fair approach to regulation and we look forward to seeing the publication of the detailed plans."

ABI to propose fee cap

ABI motor and liability policy adviser Ben Howarth added the trade body will respond to the Ministry of Justice fees consultation suggesting a cap on personal injury CMC fees.

The MoJ in February proposed capping fees charged by claims management companies handling mis-sold payment protection insurance claims.

"The weight of evidence that has come out of Carol Brady's review [of CMC regulation] and the scale of problems she has identified and which the government has acknowledged by saying the FCA should take it on - that all points to the fact that action needs to be taken on CMC fees as well," Howarth said.

Government urged to adequately fund FCA

LV general insurance claims director Martin Milliner urged government to ensure the FCA is properly resourced to regulate CMCs.

"The FCA needs more funding and resourcing than the Claims Management Regulator received under the Ministry of Justice," he said.

With greater powers there should be greater enforcement and the FCA should introduce larger fines and have the ability to criminalise the behaviour of rogue CMCs that are the heartbeat of our compensation culture," Milliner added.

He also suggested CMC directors and senior managers should be subject to the Senior Insurance Managers Regime.

Also announced in the Budget was a 0.5% increase to insurance premium tax.