Authorised claims management firms have halved in past decade

The number of UK firms authorised to provide claims management services has almost halved in the past eight years.

The figures – uncovered via a freedom of information request submitted to the FCA by financial services consultancy Broadstone – found that the number of authorised firms currently stands at 483, markedly down from the 942 that operated in 2019.

The FCA inherited the regulation of claims management firms from the now defunct Claims Management Regulator in April 2019.

In May of this year, the regulator announced that it will be launching a review of the claims management sector, following ”concerns that consumers are being failed by some [claims management companies] and law firms”.

Regulatory pressure

Phil Smith, head of redress at Broadstone, said: “The sharp decline in the number of authorised claims management firms since the FCA took over regulation reflects a market that has come under far greater scrutiny and regulatory pressure in recent years.

“Higher standards around governance, conduct and consumer outcomes have undoubtedly raised the bar for firms operating in the sector.”

He continued: “While increased oversight has helped drive out some poor practices, the FCA’s decision to launch a fresh review highlights that concerns around consumer harm and poor behaviour have not gone away entirely. This has been reflected in the multiple warnings issued around the motor finance compensation scheme.

“From a consumer point of view, people should fully understand what they are signing up to, what fees may apply and whether free-to-access routes such as the Financial Ombudsman Service are available before entering into agreements.”