FCA regulatory reforms are here, and there’s little debate that their introduction marks a huge shake-up for the claims management sector. Nigel Allen, Director of Total Claims Solutions, discusses the possible long-term impact on the industry.
On 1st April, the Financial Conduct Authority (FCA) took over regulation of all claims management companies (CMCs), including those operating in the previously unregulated Scottish market.
To continue to legally operate companies were required to apply for temporary permissions; these are to be extended to permanent status following applications between 1st April - 31st May or 1st June - 31st July (depending on the services offered and the previous regulatory status of the company).
“The FCA regulations are tough, so firms may struggle to adapt, particularly those who are used to operating entirely unregulated,” explains Nigel Allen, who has been in the claims industry for over 20 years.
“The regulation ensures that CMCs are held to the same stringent standards as other sectors monitored by the FCA, so for many the reforms represent a welcome step up in expectations.”
How will the new regulation shape the industry as a whole?
It’s no secret that the reputation of the claims industry has taken a hit in recent years, with complaints of nuisance calls and a lack of transparency leaving consumers lacking faith in CMCs.
"For too long, too many people have been pestered by unwanted calls, texts and emails from firms that often try to encourage dishonest compensation claims, at the expense of honest customers," says James Dalton of the Association of British Insurers (ABI), who welcome the ‘long overdue’ regulatory reforms.
Allen hopes that the tougher regulations will go some way to rebuilding the reputation of CMCs.
“CMCs are an integral part of the industry and most operate honestly, with customer interests at heart. Unfortunately, a small minority of ‘cowboy’ firms have tarnished this reputation.”
“Companies must earn back the trust of the consumer. A set of regulations that prohibit misleading sales calls and the selling of data for marketing purposes while advocating fee transparency (such as the new FCA rules) will, over time, help repair this relationship.”
There is a caveat, though. With the application process a lengthy one and compliance potentially costly, some warn that the FCA regulations will hit smaller CMCs hard, with many opting to close or being incorporated by larger firms.
“We saw it when the FCA took over regulation of the debt management sector,” says Allen.
“Firms operating in Scotland may find it particularly difficult to comply with the new regulations, as they mark a significant change in comparison to what they are used to.”
“The danger is that if many CMCs disappear, access to justice may be constricted for the consumer.”
If your business is struggling to get to grips with the reforms, or you need help with the full application process, visit https://totalclaimssolutions.com for further help and advice.