Mark Boleat, head of claims management regulation at the Department for Constitutional Affairs, talks to Anthony Gould about his mission to clean up the claims farming industry
The new claims regulator has a tiny budget and no permanent head office but has turned round a new regulatory regime in record time. So sitting in the Britannia Pub at Euston Station, Mark Boleat, head of claims management regulation at the Department for Constitutional Affairs, is clearly proud of the rapid progress made since the passing of the Compensation Act in the summer.
"It has been hectic," he says, "but we should be able to take applications for authorisation perhaps by the time this interview is published." The application form, rules and guidance will all be available at a new website that is presently being built at www.claimsregulation.gov.uk.
Key to the speed of delivery has been the ongoing consultation process, consisting of written submissions and a host of face-to-face meetings. This, says Mr Boleat, "has really helped shape the regulatory regime in terms of detail and practicality".
A regulatory consultative group - which includes all the relevant industry bodies, claims management businesses, government agencies and consumer bodies - has met at least once a month. On top of this, Mr Boleat has held separate meetings with different stake holders. "If anybody wants to talk to us, we will talk to them," he says.
Part of the consultation process involved raising the issue of whether insurers should be regulated for third-party claims capture - a question that raised the Association of British Insurers' hackles. However, Mr Boleat says: "What we have done with insurers has worked very well. The ABI chose to make it public but the issue was never whether insurers should be regulated - it was who by. The government has decided to regulate claims management activities - previously it had not - insurers are engaged in these activities and, therefore, they should be regulated. They are regulated by the Financial Services Authority and it is far more sensible that the FSA does it and that is what has been settled."
The consultation process has also been practical, according to Mr Boleat, who says: "We have changed a huge amount in terms of detail. For example, we had been talking about the referral of cases but this has been changed to what we really mean, which is referral of accepted cases. Another little point is in the application form, where we ask for the website address of the company. It was pointed out that some have loads of addresses, so we have asked for all of them."
He adds: "Those are small points but, if you take all of those together, you are more likely to get a sensible application form and a sensible process."
Other significant changes, says Mr Boleat, are that it has deemed claims management companies websites as advertising and they will have to comply with the Advertising Standards Authority and the Advertising Association. "This is significant - a website is not counted as advertising normally. Some of the websites we have seen manifestly breach advertising rules; for example, not saying who the advertiser is and making outrageous claims. Websites are also incredibly easy to monitor."
There are three basic rules, which include no cold calling in person; an absolute prohibition on offering a cash inducement for making a claim; and a ban on implying that compensation should be used for purposes other than the cause of the claim - although Mr Boleat admits this last rule is a bit woolly.
The scope of the regulation is about right, says Mr Boleat. "We are not duplicating anyone else's regulation, and are working with the FSA for insurers and the Law Society for solicitors over issues such as enforcement."
In terms of his powers, Mr Boleat also seems content: "People immediately jump to the issue of fines but it is not the most important power. The main power is not to authorise somebody - and the grounds for this under the Compensation Act are extensive."
He adds: "I have to satisfy myself that people are suitable and competent and, therefore, the application form is asking a lot of questions about suitability - for example, have you been disqualified as a director or by the Law Society, or struck off by the FSA. However, more importantly, we want to know about involvement in other claims management businesses during the past five years. We want the name of every business that anyone is associated with as a director, partner or perhaps more importantly, anyone that has effective control over an operation via, for example, their wife or husband.
"If somebody fills in an application form and does not provide all the information then that is immediate grounds for not authorising them. I am quite certain there are some people that we will not authorise."
Tools of the trade
Going beyond that, says Mr Boleat, another power is simply "to revoke authorisation if they are not complying with the rules. There is no more powerful tool you can ask for than that. I can also impose conditions on authorisation".
He adds: "This sector is to a large extent self-policing. If an insurance company gets a claim from a business that is not authorised, the insurer will say that it is not dealing with the business and pass the details onto me, or if it is authorised and not compliant, it will do the same. We expect the ultimate recipient of claims - local authorities and health authorities - to behave the same way. So enforcement is much easier than other sectors where quite often, such as between builders and policyholders, there is a conspiracy between all the parties."
Complaints, suspicions and observations can all be made to the regulator via the website, says Mr Boleat. "We are building a sophisticated intelligence model, using an established local authority system model to evaluate intelligence reports. In fact, I've already had some information directly from insurers and other parties that I regard as extremely valuable. However, charging high referral fees is not malpractice - that is business."
The regulator is also being proactive in monitoring the market, a process that will be conducted by Staffordshire Trading Standards based in Burton upon Trent. He emphasises that the unit - which won the tender - will be working for the DCA. STS will track and monitor websites and take part in mystery shopping, which Mr Boleat says has already started. It may also call for copies of call centre recordings, and work with other trading standards offices.
Mr Boleat is, however, keen to emphasise that when the new regime comes into place, it will not be the end of the process. "We have assumed that people will look at the regulation and try to find legitimate ways of getting round it. With this in mind, for example, we don't just talk about referral fees but referral fees or any other financial arrangement.
"Quite a lot of the existing arrangements are actually barter, for example, between solicitors and unions, with free services in exchange for personal injury claims. This is legitimate but we want it to be transparent. Also, independent trade unions are exempt - so you might expect to see a number of trade unions opt for the independent route.
"The rules can be changed at any time. If we find we have got something wrong, missed something, or something new has come up then I won't hesitate to go to the minister and say we need this new rule. It can be done quickly - there is no need for parliamentary approval.
"We already have a lot of flexibility - look at payment protection insurance - it is already within our remit if we need to do anything. At the moment, we plan to just keep an eye on it to see how the market is developing. If a completely new market appears we will take a view. The issues of credit hire and credit repair did, for example, come up in the consultation but ministers took the view that this was a business-to-business matter with no consumer detriment."
So how many people will seek authorisation? "At this stage, we have no idea - it could be about 500 or a few thousand," Mr Boleat says, insisting the regulator should be able to cope by staffing up, as funding is raised via the application fee, which for the first year will be about £400 to £800 per company.
"I fully expect the introduction of the regulation to result in significant change to the structure of the market, whatever that might be, and that this process has already started," he adds. He cites the expectation that some people will just pull out of the sector, while others will restructure, as having 20 trading names and corporate entities will be expensive.
So what of his future? "I still plan to step down by next August at the latest, when my one-year contract expires. My interest is in the preparatory work and designing the regime, it will be time for someone else to take over by the summer."
Companies will be able to begin applying for authorisation from the end of November, although no authorisations will be granted until at least December as the regulations still have to be approved by parliament.
All applications for approval need to be in by 16 February, which is six weeks before the legislation comes into full force. From 6 April operators will have to be authorised in order to operate.
For straightforward cases, the time from application receipt to approval could be three days, says Mark Boleat, head of claims management regulation at the Department for Constitutional Affairs, but it could take longer if, for example, it requires more information, such as checking for individuals' criminal records.
The trading standards operation, which for this function works as part of the DCA, checks and vets the applications but Mr Boleat will have to personally approve each one. All authorised entities will need to renew their authorisation on 28 February 2008. Annual renewal with henceforth always be 28 February. This would also be the date that any changes to the rules would probably be introduced.
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