This blog post was written by Charlotte Plant, Legal Apprentice, Manchester office.
The Financial Conduct Authority (FCA) has recently issued a Portfolio strategy to claims management companies (CMCs). This essentially outlines their vision for the CMCs and the regulation strategy from now until July 2022.
The letter covers the ‘key drivers of harm’ as identified by the FCA. The behaviours which the FCA have noticed from CMC’s which can mislead their consumers to their detriment and breed fraud.
The FCA advise that they are looking out for:
My colleagues Martin Stockdale, Steph Diaz-Smith and Chris Stubbs have worked collectively over the past few months to create a four part series focused on Claims Farming. They discuss in depth the meaning of claims farming, how it commonly occurs and the regulations in place to stop it. This blog series is particularly relevant to the points made by the FCA regarding fee structures and misleading advertising Claims Farming Part 3 and most importantly the use of existing data to create claims Claims Farming Part 1 which is at the heart of the claims farming process.
In past letters the FCA has reminded CMCs about issues with financial promotions and the importance of carrying out due dilligence to ensure the validity of claims. Given that this latest publication from the FCA to CMCs states “many CMCs have demonstrated a poor understanding of, and sometimes attitude to, their regulatory obligations”, suggests that the regulator remains concerned about practices in this area.
The FCA make it clear what the insurance industry already know, Claims Farming remains a real and present danger. It is a breeding ground for fraud and negatively impacts their own customers’ journey through the insurance process. Insurers must maintain a vigilant and robust approach towards the behaviours in order to tackle and mitigate systematic abuses.