The Compensation Act of 2006 brought regulation to the Claims
Management market making it illegal to operate a company without first
seeking authorisation from the Ministry of Justice.
Registration itself is relatively straightforward but there are lots
of rules which the company must adhere to once authorisation has been
granted and together with an application fee there is an annual fee based
upon the turnover of the business.
Notwithstanding the Compensation Act that came into force on the
23rd April 2007, firms are currently being allowed to trade
even if they have not received authorisation as long as they have a valid
application currently being dealt with. The Ministry of Justice will not
set a deadline when it will be illegal to trade without authorisation
but continues to process the applications.
For further information and to see a list of authorised businesses
please see the Ministry of Justice website at
The Solicitors Regulation Authority (SRA)(replacing the Law Society
in regulating solicitors) has drawn up a new code of conduct for
solicitors which includes a very specific element in relation to how
solicitors should conduct the business of soliciting work from claims
management companies. This took effect from the 1st July
2007. In some ways the regulation provided by the Ministry of Justice
is insufficient to ensure that you also comply with the code of conduct
from the SRA. In particular we are aware of the SRA examining each and
every trading/marketing agreement between their members and claims
Each solicitor is duty bound to ensure that each claims management
company abides by the code of conduct or it should not take work from
them. This includes a duty to ensure that their independence and ability
to provide the best advice to their clients is not undermined by marketing
agreements for example, which include use of certain insurance products.
Some analysts believe that this will have a greater effect on claims
management companies that the actual regulation from the Ministry of
Justice. One example of this is that cold calling in person is not allowed
under the Compensation Act but cold calling by telephone is allowed.
However, solicitors are not allowed to cold call by telephone!
The Ministry of Justice continues to monitor claims management companies
and their tactics can include mystery shopping where they will pretend to
be a prospective client to see what is offered and how they are passed
through to a solicitor. They continue to monitor websites and any advertising
scarried out by claims management companies.