Clamping down, quietly

News that Staffordshire trading standards would regulate claims management companies has alarmed some industry players, who last year urged government to put in place "a regulator with teeth."

Yet, Mark Boleat, the appointed regulator of claims management companies, insists the regulator will be able to cope with the task in hand. The rules, he says, will be simple short and easy to follow. But does that mean regulation will be effective?

It has been two years since the Secretary of State for Constitutional Affairs (DCA), Lord Falconer, declared that rogue claims farmers would be forced to come under a regulatory regime.

Boleat has an impressive CV with a background which ranges from being a former director general of the ABI to chairman of the Hillingdon Community Trust and the Association of Labour Providers. He is also a non-executive director of St Paul Travelers.

Earlier this year he was selected by the DCA to compose a report on the Claims Standards Council's (CSC) suitability to become the claims management company regulator, a position which it had long lobbied for. In the report, Boleat ruled out the option.

Sensitive stuff
Several months later, the DCA approached Boleat again. This time it asked whether he would be interested in the job. He accepted the position and is now ready to establish a regulatory model ready for the DCA to integrate into the Legal Services Bill when it comes into force at the end of 2007. That means Boleat is the man in charge of enforcing the rules which the DCA has spent time negotiating with industry players.

On a political level this is sensitive stuff. Whatever the rules say when they are published later this year there is little doubt that someone will be disappointed. For now Boleat is trying to define what is meant by the term "claims management company." This will link intrinsically into how much funding the new regulator will receive.

The size of the sector, he says, is unknown. "When ministers asked me [about how many CMCs exist] I said what the size of the market is, and the rules which you are going to make will help to decide it," he says.

The regulator's budget cannot be finalised until the rules are put in place and CMCs sign up for statutory approval. Boleat is undeterred by this and emphatically insists: "There is enough money in the DCA pot to underwrite it."

How much exactly? "£750k for the first two years of its money, including covering the cost of monitoring and the compliance unit. There will also be several hundred thousand pounds in fees."

According to Boleat, the biggest challenge facing the regulator is the limited time it has to establish itself. Whereas FSA regulation of brokers took three years to set up, the CMC regulator is gearing up to do it within five months.

He says there is a plan to have the rules in place by November. Then, CMCs will have until February to register. Those that have not been given statutory approval to operate by April will be forced out of the market. Or will they?

Senior insurance claims managers are concerned that Staffordshire trading standards will not have the resources to efficiently

regulate CMCs. It is a point on which Boleat is most defensive.

He warns: "Don' t be deceived by Staffordshire trading standards, it has a lot of experience of working from the ground. It does licensing, it puts resources in quickly, and it is a long way down the road. It wants to make this work."

However, Boleat concedes this is the first time a trading standards body has been used to enforce the regulations of an entire sector.

"There is a lot of interest from the regulatory community, because this structure has never been used before," he says. It seems there is a lot riding on the success of Staffordshire trading standards. "If it works here it could be a model for other areas," he says.

But can it really work? Boleat gives a categorical "yes".

"Staffs was clear that it needed to go across the country to enforce rules." But, he admits: "It's a tiny regulator. We are not going to inspect every business, we haven't the resources. We are only going to inspect if there is a reason to - that is, if there is a volume of complaints."

Complaints awareness
Yet herein lies another obstacle. How will the watchdog be made aware of complaints? It seems that complaints will be funnelled to the regulator through trading standards bodies across the country and organisations such as the Citizens Advice Bureau.

But will there be a publicity campaign to make consumers aware of the regulator?

"We are not trying to raise our profile with the public," declares Boleat. "We don' t need to. In any case, our total budget wouldn' t cover the publicity. But there will be a press campaign in spring 2007.

"It would not bother me if the public have not heard of us."

To which one claims director responds: "Then how the hell is regulation going to work?"

And there was further consternation from the source when it is made clear that CMCs may not be required to carry a kite mark to show they are an approved body. Neither will CMCs be required to show they are financially sound.

And, as Lord Hunt of Wirral point out, CMCs initially will not have to carry compulsory professional indemnity insurance. There are also, admits Boleat, issues with what activities will be measured and what methods will be used. "We are saying its turnover, but in a lot of this business there is no turnover. It is benefits in kind," he says.

To claims departments the "regulation" of CMCs may not sound very convincing. Boleat appears to be relying on the threat of regulatory enforcement to ensure claims farmers do not flout the rules.

For the majority of the sector this may be true, but an anonymous regulator may have little impact on those which are involved in more dubious practices. Boleat, an expert in regulation, is nevertheless convinced he capable of doing a proper job.

Whatever criticisms come his way over the next 12 months there is little doubt that he has heard the same accusations before. And what is more, he has silenced critics in the past with his actions, and is gearing up to do it again.