Compensation Act hailed by Ministry of Justice

Claims management cowboys are on the decline one year after government regulation of the industry came into force, according to the Ministry of Justice (MoJ).

The MoJ said the Compensation Act, which introduced regulation in April 2007, had helped to clean up the industry.

Justice minister Bridget Prentice said: “The first year of formal regulation has seen many achievements in dealing with the malpractice, not least the almost total removal of unauthorised marketing in hospitals, cold-calling in person and misleading use of the expression ‘no win no fee’.”

Staffordshire county council’s trading standards unit is enforcing the regulation of the industry as part of a three-year contract with the MoJ.

But Andrew Welch, partner and head of litigation at Stephensons Solicitors, said the improvements were also due to work by the Solicitors Regulation Authority (SRA).

He said: “We, as every other solicitor in the country, have had letters and emails saying that if you accept claims from unauthorised claims management companies, you’re going to be in big trouble. I think it’s given solicitors pause for thought.”

Of the 1,700 claims management companies authorised in the first year of regulation, 52 have had their authorisation cancelled or suspended.

Since the act came into force, a strategy has been developed to handle frauds such as contrived accidents. There has also been a reduction in malpractice by companies handling claims to the Criminal Injuries Compensation Authority, with some businesses voluntarily leaving the market.

The ministry said: “When the importance [of contrived and induced accidents] was realised, a strategy was developed involving co-operation with the SRA, the Insurance Fraud Bureau, the Insurance Fraud Investigators Group, the City of London