Fears that consumers will have to resort to law for recompense

Concerns have been raised about the extent of the powers of the newly established regulator of claims management companies (CMC).

Writing in Insurance Times this week, Lord Hunt of Wirral, who was responsible for guiding the Compen-sation Act through the House of Lords, said: "I was slightly perturbed to learn the regulator may not have the powers to order compensation to a claimant.

"What about cases where mistakes have been made: will consumers have to resort to law again for recompense?"

Hunt also expresses concern that CMCs will not be required to have professional indemnity insurance.

"Bonding is straightforward and professional indemnity insurance would surely be readily available. I fail to see how else we can ensure consumer protection," he said.

Mark Boleat, the DCA's appointed head of claims management reg- ulation, admitted that using a trading standards body to enforce regulation was a first for the government.

He also conceded: "It's a tiny regulator; we are not going to inspect every business out there. We have not got the resources.

"We are only going to inspect if there is a reason to, that is, if there is a volume of complaints, or because their activities go against the rules."

It will be a blow for the insurance industry, which last year heavily lobbied for a "regulator with teeth".

Boleat said Staffordshire Trading Standards will be able to enforce rules, but it would rely on bodies such as the Citizens Advice Bureau (CAB) to report malpractices.