Brokers who refer personal injury claims to local solicitors must now be authorised by the Ministry of Justice (formerly the Department of Constitutional Affairs), according to DAS.
From 23 April it became an offence to offer claims management services without prior authorisation, exemption or waiver. Those found operating without authorisation face a maximum of two years' imprisonment.
The regulation only applies to brokers that are making significant amounts of referrals to local solicitors. "Significant amounts" means more than the Compensation Act's cut off point of 25 case referrals per calendar quarter.
The new Compensation Act regulations apply if there is no legal expenses insurance (LEI) in place and clients or others are advised by a broker how to pursue a claim.
The Act covers commercial claims management services regarding claims for personal injury, employment, housing disrepair, industrial injuries disablement benefits, criminal injury and financial products and services.
Ray Kneeshaw, DAS head of sales and marketing, commented: "Brokers are only regulated by the FSA for their direct insurance activities. They are not regulated by the FSA for any third party activities such as claims capture. This means they cannot obtain exemption through the FSA and should, instead, apply for authorisation through the Ministry of Justice".
