Ministry of Jutsice prepares to crack down on claims management companies.

The Ministry of Justice (MoJ) plans to crack down on claims management companies as their first year of regulation comes to an end.

Kevin Rousell, head of claims management regulation for the MoJ, revealed that of the 1,700 companies authorised in the first year of regulation, only 22 have had their authorisation cancelled or suspended.

Rousell said: “This figure will rise in the next couple of weeks as some formal suspensions start to kick in following the review of authorisations carried out for the new regulation year.”

The Compensation Act, which came into force in April 2007, legislates for the regulation of claims management companies. It was introduced in an effort to ensure professionalism in an industry that has traditionally suffered a poor reputation.

The legislation also applies to insurers who have claims management arms that do not fall under the FSA’s remit.

Rousell said the Act had already had a positive impact, claiming there had been a drop in complaints about cold calling and hospital advertising by claims farmers.

He said: “Organised cold calling has stopped. Insurance companies have been telling us that local authorities have noticed a marked decrease in frivolous claims, which I think is driven a lot by regulation and driving these people out of the market.”

He added: “We hear less of those terms such as ‘cowboys’. We’re achieving basic standards in what before was the Wild West. It’s better for those who are defending claims because they’re getting claims brought to them which should be better quality and less frivolous.”

The MoJ’s full one-year Impact Report of the Compensation Act is expected in mid-May.