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@Mick C25 February 2016 09:23 am:

"...The Compensation Fund would be at risk if claims had deliberately been "under-settled" to generate cashflow. .."

Thats my view as well.

".....This would not be negligence but dishonesty. The Insurers would therefore not pay out, or in any way be liable. .."

That's correct as well, and remember that the reason for The Banks and Insurers Legal Services Act 1998, was that they have deeper pockets (and proper professional bodies)...

"...That would then leave the Compensation Fund as the only source of money to pay such claims. ..."

And are the Claims Handling Society / Claims Handlers Regulatory Authority really going to fight such multi million pound claims against an industry that can take £500 Billion off the public in QE? Errrrm I think not.

"...It would almost certainly be worthwhile for a Claimant firm to have a go on these lines... "

Absolutely. I would.

Its a game changer. privatise the profits, semi-nationalise (amongst an ever dwindling independent 'profession'), the losses ....