The majority of insurance policyholders are honest but are paying towards the £1.3Bn cost of detected fraud. Despite the fact that over the last 15 years road traffic accidents have reduced by 39%, personal injury claims (largely whiplash) have increased 90%.
Therefore the Insurance Fraud Taskforce was established as an independent body by HM Treasury and the Ministry of Justice in order “to investigate the causes of fraudulent behaviour and recommend solutions to reduce the level of insurance fraud in order to ultimately lower costs and protect the interests of honest consumers”.
Their final report included 26 recommendations to tackle fraudulent activity which were all accepted by Government.
Recommendation 20 stated: The Government should establish a stronger regime for claims management companies (CMC) regulation and ensure that the regulator has adequate resources and powers to do its job effectively.
In particular the regulator should:
• effectively police the referral fee ban
• prevent the use of failed and restarted “phoenix” companies
• consider how to deal with those organisations providing claims management services outside the regulated sector
• liaise with the ICO16 regarding the abuse of data protection rules
• maintain a robust regime to ensure those regulated firms are run by fit and proper persons
In March 2016 the Chancellor announced in his budget that Government accepted the recommendations of the independent review by Carol Brady into the regulation of CMCs and Treasury confirmed that the FCA would be put in charge of the new regulatory regime.
However, there is still no legislative vehicle to action this change.
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