Reform of the regulation of the claims management industry ‘to help to drive out further unnecessary costs from insurance premiums’ featured in today’s budget speech.

Chancellor George Osborne’s budget announced ‘a fundamental review of the regulation of claims management companies (CMCs)’, led by the chair of the Chartered Trading Standard Institute’s Board, Carol Brady. It will report to HM Treasury and the Ministry of Justice in early 2016.

The Treasury’s budget policy document stated: ‘In addition, there is also a case for reform of the fees that CMCs charge consumers, particularly in those instances where consumer complaints fall within the remit of the Financial Ombudsman Service.

‘Therefore, the government will bring forward proposals for the introduction of a cap on the charges that CMCs can apply to their customers, and will consult on how this will work in practice.’ 

According to the Treasury, this move ‘builds on the success of previous measures including the ban on referral fees and action to address fraudulent whiplash claims’.

Claims-handler National Accident Helpline said it welcomed the review.

Chief executive Russell Atkinson said: ‘National Accident Helpline has been working hard to drive up standards in the sector, through initiatives such as our Stop Nuisance Calls campaigns, and has been working proactively with government through the Insurance Fraud Taskforce. We look forward to working with the government to ensure the practices of CMCs are in the best interest of consumers and access to justice is not impaired.’

David Johnson, partner at national firm Weightmans and former president of the Forum of Insurance Lawyers, said: 'There is certainly a need to address cold calling by CMCs and to ensure that the costs they incur when dealing with claims is kept proportionate, whether for the sake of their clients, the insurance premium paying general public or both.

'The capping of costs must, of course, be at the right level and the government will need to ensure that there are appropriate mechanisms for enforcement to avoid the same difficulties that have arisen in connection with the banning of referral fees.'