Danielle Gray reports on industry fears that the new Compensation Bill has produced more questions than solutions
The much-anticipated Compensation Bill, released last Thursday, has received a mixed response from the industry.
The Claims Standards Council (CSC) lauded the document as finally giving "teeth" to regulate claims management companies, but others say the draft legislation has failed to meet expectations.
The Lord Chancellor, Lord Falconer, claimed that the Bill is an instrumental step towards reducing the "culture of fear" that has, for example, seen schools cancel children's outings to avoid potential litigation.
The Bill comprises two parts: guidance on what constitutes a negligent act and a framework for the regulation of claims farmers
Although the need for the regulation of claims management companies has been wholly embraced by the industry, the Bill has been criticised for not providing any answers on who should regulate the industry, or a clear definition of negligence.
The CSC, which volunteered itself as the regulator for claims management firms, is considered to be the frontrunner for the role of statutory regulator.
Andrew Wigmore, the CSC's policy director, says the CSC is making representations to the government to become the industry regulator and will release self-regulatory codes to the Office of Fair Trading at the end of the month.
Even Lord Falconer intimates that the council could take on the responsibility until the role is integrated into the restructure of the legal industry when the Law Reform Board is established - provided the CSC meets the necessary requirements.
But others argue that the CSC has not shown itself to be suitable for the job, suggesting that bodies as diverse as the FSA or the Law Society should be the regulator.
David Williams, AXA claims director who supports the CSC's bid to be regulator, said: "The CSC is the only organisation out there trying to do something, but it is possible a few other bodies may vie for the role.
"We have to question why these other companies have joined the debate now and why they were not doing something before then."
Williams said he supported the Bill but warned there were still areas outstanding, such as the regulation regarding the fixed fees regime and how the Bill would support the NHS Redress Bill.
The Bill's efforts to include a statutory definition of the law of negligence have also caused some concern.
Williams said: "The government tried to define negligence and it was a good attempt. However, if we are not careful it could open everything up to a raft of litigation."
Bodies such as the Association of Personal Injury Lawyers, the Civil Justice Council (CJC) and the Federation of Insurance Lawyers also harbour concerns that the definition is open to interpretation.
Foil's vice president Neil McLaughlin said: "Defining the term negligence was a massive promise to make, and what was delivered in the Bill will hardly affect the claims landscape."
He added that he believed the Improved Access to Justice and Proportionate Costs report released by the CJC would make a bigger impact on claims regulation. The report was submitted to the Lord Chancellor earlier this year as a stand-alone document and will be discussed at a forum in the New Year.
Meanwhile, claimant law firm Thompsons has accused the government of dancing to the tune of insurers over a non-existent societal concern. Tom Jones, director of policy and public affairs for the firm, said: "All ministers needed to do to curb the excesses of the claims management industry was to introduce simple regulation.
"Instead we have a Bill that confuses the law on negligence, introduces a vague notion of a desirable activity and may impact on the ability of organisations such as trade unions to provide high quality legal services."
The Constitutional Affairs Committee has now begun its own investigation into whether there is a compensation culture in the UK, the effect that 'no-win, no-fee' agreements have had on the industry, whether firms that refer people or advertise fee agreements should be regulated and whether laws should be changed relating to negligence. Perhaps this will provide the answers that the industry had hoped the Bill would address. IT
What the Compensation Bill proposes
What happens next?
The Bill will be sent to the House of Lords for its first debate.
Meanwhile, a cross-party Constitutional Affairs Committee will develop its own research on whether a compensation culture exists in the UK. Its final report will be sent to the House of Commons ahead of a Commons debate on the Bill.
Committee chairman Alan Beith told Insurance Times the report is expected to arm MPs with the ability to recommend possible amendments to the Bill.