The body that will regulate the claims industry is soon to be announced. Katy Dowell weighs up prospects of the key contenders
The government is on the verge of announcing which body will regulate claims managers when it debates the first draft of the Compensation Bill in November. Competition is mounting between those vying for the post. But who is likely to succeed in the political battlefield?
The Claims Standards Council (CSC) has manoeuvred itself to become, in its view, the number one choice. But some believe the Law Society should be put in charge. And others want the government to create an independent board comprising representatives from each sector with a vested interest.
Speaking at a CSC Labour Party fringe meeting the Secretary of State for Constitutional Affairs, Lord Falconer, says: "Our role is to set up a framework and message saying you can make a claim when you have a good claim.
"Effective regulation is necessary - we cannot afford to wait for the Legal Bill shake-up. We will introduce a form of regulation in the Compensation Bill which will pass through parliament next year."
Lord Falconer says regulation will be provided either by an existing body or a newly created institution. He adds that the regulation of solicitors involved in the claims process will come from the Law Society, through the restructure of the Legal Bill.
But Tony Burns-Howell, CSC chief executive, argues that the formation of an FSA-style regulator "will not work." But he says that the introduction of a regulator is essential to the future of claims managers.
The CSC is vying for this role and it has some high level support within the industry. AXA claims director David Williams says the CSC is in pole position. "It has a very good chance of becoming the regulator. It is clear that the CSC nearly has enough support to do it - it just needs the power."
Others believe, however, that the Law Society would be better suited for the job, and that claims managers should come under its jurisdiction when the Legal Bill is rehashed.
The CSC has its critics. One source told Insurance Times: "It is important that the regulator has teeth. Unfortunately the two biggest claims managers, National Accident Helpline (NAH) and the Injury Lawyers Helpline (ILH) are not represented by the CSC.
"Both feel that the CSC is tainted by some of the more dubious outfits that it represents.
The CSC should be attempting to get rid of some of them."
The source adds that NAH and ILH are seen as two of the most reputable claims management companies in the business. Their disassociation with the CSC "speaks volumes".
Williams disagrees, saying claims farmers have "let themselves down" by failing to rally around the CSC. "The CSC came up with a code of conduct which has restricted some practices from taking part. Once the CSC becomes the regulator they will have to take part."
But what if the Law Society is given the controlling hand? It would give solicitors the authority to control the actions of claims managers.
But whether the Law Society wants the extra responsibility of regulating claims farmers is debatable. "It could become an extra responsibility shoved onto its plate," another source says. "No one wants to end up with a regulator that is unhappy with what it has been told to do."
There could also be further discussions about the business model employed by claims farmers. Should lawyers be involved in the system at all, or is their involvement merely pushing up the cost of the process?
"It is vital that an independent person represents the client's views," the source adds. "Particularly for those who make a claim just once and have no understanding of the process. At the other end of the scale claimants will want a lawyer involved because they could be talking about huge sums of money. We may need to discuss who is paying what and how."
But Burns-Howell says consumers do not trust the Law Society: "Consumers have no faith in the Law Society to investigate their complaints."
At the very least the Law Society would be expected to introduce some set standards into the judicial system. Writing in Insurance Times last month, the vice president of the Forum of Insurance Lawyers (Foil), Neil McLaughlin, said: "There is no consistency across courts in the approach to mediation schemes; equally, the experience of Foil members is that some claimant lawyers are enthusiastic about mediation, others hostile.
"This could lead to two claims of similar value and issues being resolved very differently depending on where you are and who you are dealing with."
If it were the regulator, it is highly likely the Law Society would be required to introduce rules to harmonise the differing practices of lawyers.
There are also concerns that regulation of claims farmers could be out of step with the anticipated changes to the judicial system. One source says the Law Society should be tasked with merging the two regulatory arenas to establish a set of consistent values.
While AXA appears to support the CSC, Dominic Clayden, Norwich Union's director of technical claims services, is playing a waiting game."Until we have some sort of government proposal we don't want to engage on this," he said. "We would prefer claims farmers to self-regulate but are unsure as to what the government view on this will be.
"The CSC is a voluntary trade organisation, representing only a relatively small number of claims management companies."
Williams says AXA is on the front foot by engaging in lively debate from the outset.
He claims that other insurers who do not take part in discussions will be left out in the cold.
"It is disappointing that more insurers aren't talking about this," Williams says.
"We will never get a healthy dialogue going if insurers aren't willing to take part."
The government may opt for neither the CSC nor the Law Society, instead appointing a new independent regulator similar to the FSA. This could also have its problems.
Bringing representatives together from the two organisations could result in a 'cat fight', with customers suffering further. With two years until regulation is truly effective, whichever body the government chooses to regulate claims farmers will, undoubtedly, have a battle on its hands.
Who should be the new claims regulator - the pros and cons
Claims Standards Council