Skip to main content
Skip to navigation

Mail To a Friend E-mail this to a friend

Fraud focus: regulating the claims farmers

Published 04/05/2007

It is widely accepted that one of the main contributors to the cost of insurance fraud is the ancillary services industry that has built up around insurance claims. Often linked together under the umbrella term of ‘accident management’ services, this multi-million pound industry has attracted its fair share of unscrupulous traders and was left unregulated for too long. However, as of 23 April the full effect of the claims management regulatory regime has been in force and it is now prohibited to provide ‘claims management services’ unless either authorised or when an exemption has been granted.

For the purposes of the regulations, claims management services include activities such as providing claims advice, advertising, marketing and providing representation. However, the regulations are designed to capture previously unregulated businesses that operate in this sector, so businesses that provide these services but are already subject to another form of regulation, such as lawyers, charities and trade unions, are exempt from regulation.

Nevertheless, the claims management regulator is set to work closely with other regulatory bodies to exchange information and ensure compliance.

There are several types of ‘claim’ that the regulations apply to including personal injury claims, certain benefit claims and financial products and services. According to a recent report released by the Department for Constitutional Affairs – the body responsible for overseeing regulation – the market in respect of personal injury is worth in the region of £190m a year. The report goes on to set out findings that will be all too familiar to the insurance industry including the fact that there is substantial scope for malpractice, including marketing for injury claims in hospitals and contrived accidents leading to fraudulent claims.

The insurance industry has a major part to play in alerting the regulators to unauthorised businesses that are trading illegally. Insurance claims handlers will interface directly with business purporting to provide claims management services and it is they who will, to a large extent, be the eyes and ears of the regulators who will in part be reliant upon external reports. Removing these businesses from the market can only be a positive step and, thankfully, the applicable legislation has the teeth to take decisive action. Penalties for non-compliance can include a term of imprisonment of up to two years and a fine. To date the DCA has said that more than 800 businesses have been authorised.

Jamie Taylor is head of motor claims fraud at Hill Dickinson

This article has been reprinted with permission of the Claims Standards Council

Related articles