My Lords, I declare my interests as set out in the register, as I have just entered the 50th year of my partnership in the global legal firm DAC Beachcroft. I also chair the British Insurance Brokers’ Association. Colleagues will recall that I have made a number of speeches about the need to regulate the claims management sector. Further reform is urgently needed, but these amendments are a step in the right direction and I welcome them.
One of the biggest problems posed by CMCs is the potential for consumers to lose a large proportion of their damages in fees, despite the fact that the level of expertise required for a CMC to manage claims is remarkably low. The regulation of these firms should therefore be consistent across the whole sector. I will just mention two significant benefits that come from what the Government are now doing. First, we will have a robust authorisation regime based on understanding the business models of individual CMCs, which will prevent those firms that do not offer good value for consumers operating. Secondly, we will have personal accountability for senior managers of CMCs to ensure that when a firm is struck off, its directors cannot simply resurface as a new CMC.
The FCA now has the power to cap under these amendments, but it should urgently consider extending the cap to other claims to address the drastic spike in claims related, for instance, to gastric sickness while on holiday, to which the noble Earl, Lord Kinnoull, drew attention in earlier debates. It is no coincidence that there has been this massive surge in claims, just as CMCs prepare for the deadline for bringing PPI claims and the introduction of measures to tackle the high number of whiplash claims. We are therefore dealing with quite a range of possible actions that the Government need to take.
I was disappointed, not by anything my noble friend Lady Buscombe has ever said or done, but because the Government published a consultation response last week entitled Cutting Costs for Consumers in Financial Claims which was completely silent on any plans for action in the sector. By need for action I mean the need to control charges in the personal injury sector,
especially as the Government move forward with long overdue plans for whiplash reform. Question 20 in the original consultation paper was:
“Is there a need to consider further fee controls in other regulated claims sectors such as Personal Injury or Employment in future?”.
I do not know what the replies to that question were but, sadly, there was complete silence in response. I just hope that, as the FCA prepares to regulate this sector, it will bear in mind at the height of its agenda the customer/consumer detriment from the actions of CMCs, which we have debated many times in this House. At last, it appears that action is being taken, but it will have to go much wider than these amendments, although they are a very good start.