Financial Guidance and Claims Bill [HL]

Lord Hunt of Wirral Excerpts

Report: 2nd sitting (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

Moved by

[Lord Hunt of Wirral]

39A: Clause 16, page 12, line 38, at end insert—
“(ba) arranging the provision of temporary replacement motor vehicles,”

[Lord Hunt of Wirral (Con)]

My Lords, I declare my interests as set out in the register, particularly as a partner in the global legal firm DAC Beachcroft LLP and as chair of the British Insurance Brokers’ Association.

I return to matters I have raised previously. The context for the further concerns about the regulatory framework for claims farmers lies in the Government’s plans for whiplash reform, as outlined in the Queen’s Speech. The aim of that reform package is to crack down on,

“minor, exaggerated and fraudulent road traffic accident related soft tissue injury claims”.

That quote is from my noble and learned friend Lord Keen of Elie in his foreword to the Government’s consultation paper nearly a year ago.

Noble Lords expressed their dismay in Committee at the rich harvest of unsolicited and unwanted nuisance calls and texts, which Members of this House and millions of our fellow citizens continue to receive as I speak. I spoke previously about the need for every loophole to be closed and for a commitment that where there is a claim there is regulation.

--- Later in debate ---

I hope my noble friend will agree that it is too early to presume that there will need to be a fee cap for CMCs operating in the personal injury market, which has a different business model to financial services. I hope he agrees that the FCA is well placed to monitor and respond to any emerging risks. In light of that, I encourage him to withdraw his amendment.

[Lord Hunt of Wirral]

My Lords, I am very grateful to the noble Earl, Lord Kinnoull. I completely understand his reference to Meccano; I suppose it is easy to pretend that we have moved on, as the noble Lord, Lord Deben, said—advised, no doubt, by his grandchildren. I understand the point that there needs to be a structure; it is that about which I was hoping to persuade the Minister.

I am also very grateful to my noble friends Lord Flight and Lord Deben for their support. I sensed a feeling around the House that something needs to be done. Does the Minister understand that I have been gnawing away at this particular problem for over 10 years? I think it was the noble Baroness, Lady Ashton, who took through a Bill some considerable time ago that recognised the need to regulate claims management companies. Many examples were given then, many years ago, of how that represented a growing market. Looking around us today, particularly at holiday sickness claims, you suddenly realise that a new breed of companies are exploiting the admitted rights of individuals to compensation, but in return are demanding a share of that compensation. That has become the lifeblood of these claims management companies; and they keep changing. One moment, you impose a different form of regulation, then the next, you see that the companies have completely escaped any form of regulation.

It may well be that the Minister is right to look to the future with confidence, knowing that the Financial Conduct Authority will now be dealing with the problem. He is right to point out that the FCA has power under existing legislation. Perhaps we will see at last a reining in of these individuals, who have been feeding on the lifeblood of victims who cannot afford to allow part of their compensation to be siphoned off into a developing, stronger claims management company. In a way, I suppose my noble friend was saying that I have made a serious error of judgment in labelling them all as claims management companies. It may well be that they do not fit that description, but I think we all know what we are talking about when we refer to claims management companies. I call them claims farmers. I recently attended a conference where I was asked why I have this vendetta against claims farmers; I admitted that it is because they have no justification for what they do and for the way in which their business model has developed. The Minister has made a number of commitments—I can see him quickly checking his notes on what commitments I am referring to—and I sensed a considerable amount of sympathy for the point I was making. I want to reflect carefully on all the points.

[The Earl of Kinnoull]

I have here the report I referred to, from the Competition and Markets Authority. Paragraph 2.37 states:

“The range of services provided by CMCs can include … (d)”—


among other things—

“providing credit repair and credit hire for non-fault claimants”.

In other words, as far as the CMA is concerned, claims management companies certainly include credit hire companies. In my bit of the industry—underwriting—we would absolutely think that they are part of the same thing. No one has objected to that. It is very clear throughout that section of the CMA report that they are one and the same.

[Lord Hunt of Wirral]

I am grateful to the noble Earl for making that important point. I do not necessarily want to speak on behalf of the Minister, but I sense that his response may be that other people do that work as well. We need to try to ensure that we fulfil my objective that where there is a claim, there should be regulation. There should be a structure whereby there is some control of the companies seeking to exploit the situations certain people who need to bring a claim find themselves in.

I will reflect carefully on all the points my noble friend the Minister raised, but this problem is not going to go away. I can see it increasing.

As I am already becoming aware, there is other legislation in respect of which claims managers are looking at new areas to fasten on to and exploit. We have to be prepared to deal with that in advance, rather than seek to catch up, as we have tried to do for the last 10 years. Let us move ahead. In the meantime, I thank my noble friend for all he has said and I beg leave to withdraw the amendment.

Amendment 39A withdrawn.