The FCA has announced key requirements for claims management companies (CMCs) upon taking control of regulation in April 2019, signalling changes that could curb the excessive charges that have impacted fleet management.
The FCA’s proposals will require CMCs to provide a potential customer with a short summary document containing important information such as an illustration of fees charged and an overview of the services the CMC will provide. This document will need to be provided before any contract is agreed.
CMCs that buy so-called ‘lead lists’ from third parties will be required to carry out due diligence to ensure that the leads have been obtained legally and to keep records of this. The FCA is also proposing that CMCs will have to record and keep all calls with customers for at least 12 months.
Other requirements on firms will include a requirement for firms to hold capital linked to the type of business they undertake and further new requirements to protect any money firms hold on behalf of clients.
Firms will need to notify their intention to register for Temporary Permission and pay the relevant fee to the FCA before 1 April 2019. Firms will then need to go through the FCA’s authorisation process. Andrew Bailey, chief executive of the FCA said:
“A well-functioning claims management sector can help to provide justice and redress to people who have suffered harm. But the market doesn’t always work as it should and poor conduct persists across the sector.”
Fleet benefit from legislation
Businesses with vehicle fleets have been hit by huge bills from rogue CMCs following minor traffic accidents.
Examples given by ConstructionInsure.co.uk include a scaffolding company’s van which was involved in a minor collision with a parked motor cycle.
The motorcycle, worth £1,500, was parked and hit by a van. The claims management company placed the motorcyclist on a hire bike at a cost of £150 a day.
After repeated delays by the management company the hire bill came to £45,000 – far higher than the cost of the actual repair.
In another case a haulage vehicle knocked a parked Jaguar which incurred wheel rim damage and a punctured tyre (pictured) costing around £1,000 to repair. Rather than replace the tyre the CMC claimed the car as undriveable and the hire costs of the replacement car came to £10,000. Mark Herbert of ConstructionInsure.co.uk said:
“It’s great news that the FCA are now stepping in and will be regulating these claims management companies. Admittedly, some are much worse than others, but if the cowboys can be squeezed out, then you will be left with companies who actually provide a good service to clients.”