The draft rules are a good start, says Claire McKinney

' The insurance industry's huge challenge is how to deal with the claims management industry. Whether you love them or hate them, it would seem that claims management companies are here to stay (albeit that some might have a short shelf life).

The Better Regulation Task Force's primary recommendation was that the industry should attempt to self regulate, but if that was not achieved, with OFT approval, by December 2005, then regulation would be imposed. This was supported by Lord Falconer, who said: "We want to see a major change in quality and behaviour, so that the service provided to the consumer is improved significantly." The work in this area has begun and a very brave attempt has been made by the Claims Standards Council (CSC) to provide a draft code.

However, the challenge is not just to have a code, but to demonstrate buy-in from the industry and show that the system is working. At the conference, CSC chief executive Anthony Burns-Howell said that the organisation lost members as soon as it banned cold calling and that is just the beginning.

The draft rules, quite rightly, require claims management companies to submit to training and some fairly sophisticated policies and procedures. The financial and organisational cost of compliance could prove a real barrier for entry.

What is missing from the rules at present is the requirement for additional financial security to protect the consumer. At the conference, I suggested that this could be solved by the companies being required to take out a bond along the lines of ABTA associated travel agents and 77% of the audience agreed. This might be yet another disincentive to those entering the industry to make a quick buck and then retreat to their villa in Spain, but that can only be a good thing. IT

' Claire McKinney is president of the Forum of Insurance Lawyers