The number of claims management companies is likely to be slashed by half to just 100 once compulsory authorisation comes in next April, the government's new head of claims management regulation predicted last week.


Mark Boleat said regulation would cause many unscrupulous companies simply to withdraw from claims management.



The Department for Constitutional Affairs (DCA) has allocated £750,000 per year for the next two years to cover the costs of regulation. This includes a deal sealed last week with Staffordshire County Council Trading Standards for it to provide a dedicated monitoring and compliance unit.



Mr Boleat said the new regulatory regime - which will apply to law firms' separate marketing arms as well as pure claims management companies - would target aggressive selling and misleading charges.



Rules relating to the regulation of claims management activity - as set out in the Compensation Act 2006 - will come into force in November, when firms will be invited to apply for authorisation to act as claims managers. An offence of operating without a licence will come into force next April.



Mr Boleat said: 'The new law will fail if it does not have an immediate impact. The prediction is that a number of claims management companies will choose not to be authorised. I expect that only 100 substantive claims management companies will be regulated.'



He added that the £750,000 budget for regulation was much lower than for other sectors, such as licensing.



The DCA took on claims management regulation after the Office of Fair Trading and Financial Services Authority declined to do so. A report conducted by Mr Boleat on behalf of the government last year also ruled out the Claims Standards Council (CSC) as a potential regulator.



Mr Boleat added: 'It was clear to me very early on that the CSC was very unlikely to be able to become a regulator. But I never had the slightest intention or wish to become the regulator myself at that time.'



CSC spokesman Andrew Wigmore said he fully supported Mr Boleat's appointment. He said the CSC now accepted that it would not have been equipped to act as regulator.



Mr Wigmore added: 'There are currently about 200 pure claims management companies, but there are thousands of law firms with marketing arms that will come under regulation. A lot of these may join a big marketing entity such as InjuryLawyers4U to save them seeking individual authorisation.'



Rachel Rothwell