Claims Management Company Closures follow referral fee ban
A report revealed by the Ministry of Justice has shown that the number of Claims Management Companies (CMCs) authorised to deal with personal injury claims has dropped substantially over the past year, from approximately 2,435 firms in 2012, to a figure of around 1,700 as of June 2013.
The report concludes that the reason for the reduction has been the ban on referral fees, paid by solicitors to insurers for passing on cases, implemented as part of the Legal Aid Sentencing and Punishment of Offenders Act (LASPO) in April of this year.
The figures were included in last week’s Annual Report of the Claims Management Regulation Unit, (view here) based at the Ministry of Justice, and is responsible for regulating those companies which advertise directly for claims and handle them on behalf of people pursuing, amongst other things, compensation for injuries. The Claims Management Regulator anticipates that the Personal Injury Sector will continue to contract significantly throughout the remainder of 2013, with those CMCs unable to adapt their business models and acclimatise to the new landscape, leaving the market.
The Unit has been enforcing the referral fee ban since April, visiting more than 450 CMCs in England and Wales and further investigating more than 140. In total there were 12,127 complaints about Claims Management Companies to the Regulator in 2012, resulting in more than 500 such companies being formally warned, suspended or having their licences revoked.