The public is expected to be better safeguarded and claims management companies more strictly regulated after the Compensation Bill received Royal Assent yesterday.
The Compensation Act 2006 will also ensure that the recovery of compensation by people who contract mesothelioma, because they were negligently exposed to asbestos, will be quicker and simpler.
It will also give reassurance to voluntary organisations and other groups who have curtailed activities due to a fear of litigation.
DCA Minister Baroness Ashton said: "The Compensation Act is an important step in tackling false perceptions of a compensation culture. It will ensure that there is proper regulation of those who manage compensation claims.
"For too long people have been pressured into making claims by "hard sell" tactics and misled by inappropriate and aggressive advertising. This legislation will make those who sell such services conform to strict rules of conduct and deal with their clients honestly."
The Act paves the way for a new regulatory regime that is expected to be in place by Spring 2007.
Regulation will be undertaken directly by the Secretary of State for Constitutional Affairs, supported by a senior individual with appropriate skills and experience recruited from outside the civil service.
It has been confirmed that subject to finalising terms, Mark Boleat will take on this role from September 2006.
A key part of the proposed regulatory mechanism will be an external monitoring and compliance unit, utilising the existing expertise of a local authority trading standards department under contract to DCA.
This will ensure that benefits are delivered to consumers as quickly as possible.
After regulation comes into force, any unauthorised person offering claims management services will be committing an offence and will be liable to up to 2 years imprisonment.
The Act also confirms that courts considering what standard of care is reasonable in a claim for negligence or breach of statutory duty can take into account whether requiring particular steps to be taken to meet the standard of care would prevent or impede a desirable activity from taking place.
This is expected to improve awareness of this aspect of the law and will help to ensure that normal activities are not prevented because of the fear of litigation and excessively risk averse behaviour.
