Claims management companies (CMCs) in the UK have earned just shy of £6.3 billion in the last ten years.
A report released by the Ministry of Justice’s Claims Management Regulator has revealed that CMCs dealing with financial product and service claims have made £3.4 billion between 2007 and 2017, while personal injury CMCs have collected £2.8 billion.
Employment (£50.3 million), industrial injury (£12.9 million), criminal injury (£10.2 million), and housing repair (£5.5 million) claims all decreased significantly in turnover over the ten-year period.
The Regulator has granted licences to over 6,800 CMCs since 2007, audited 2,022, issued 478 warnings and £2.8 million in fines. It has also cancelled 1,387 licences and received nearly 94,000 enquiries or complaints from people in relation to CMCs.
The report said that after a period of rapid growth during the first four years of regulation, there has been a steady decline in the size of the claims management industry since 2011 as a consequence of major regulatory reforms.
The total number of CMCs has fallen year on year from a peak of 3,213 in 2011 to 1,388 in 2017. The rate of decline has slowed in the last two years however, as the market began to show signs of consolidation.
Personal injury remains the largest claims management sector in terms of the number of CMCs in operation, but financial claims sector has superseded it for four consecutive years, generating more than twice the turnover of the once dominant personal injury sector.
Kevin Rousell, head of claims management regulation at the MoJ, said that few could have anticipated the nature, complexity and sheer scale of challenge facing the claims management regulator back in 2007.
“That the Claims Management Regulator (CMR) would remain part of government in the Ministry of Justice for over a decade – with an extended remit, a dramatic increase in claims activities and a workforce approaching 150 staff – was not in anyone’s original vision,” he wrote in the report.
“The years have brought many difficult compliance and policy challenges and in particular more recently the fundamental review of the current regime and its future. The development of regulation, and of the regulator, over this time has been made possible by Claims Management Regulation Unit (CMRU) staff and many others driven by the ambition to make a real difference to the protection of consumers of claims management services.”
He added that with a decade of hard work behind it, the most challenging period for the Regulator now lay ahead with the planned move of CMC regulation to the Financial Conduct Authority (FCA). Russell said that this would bring about an even stricter regime and was a significant logistical exercise to prepare for and deliver.
“The eventual transition will be helped greatly by the strength of the current regime and its people,” he wrote.
“I have been immensely impressed with the commitment, drive and determination of CMRU staff over the years, often in very challenging organisational and sometimes also personal circumstances. I remain confident that this commitment will continue for as long as the CMRU continues to be responsible for managing and delivering regulation.”