Compensation (Claims Management Services) Regulations 2006

I am most grateful to the noble Lords, Lord Kingsland and Lord Carlile of Berriew, for their consideration and questions on these three orders. I shall attempt to answer their points. First, the noble Lord, Lord Kingsland, asked about overlapping regulations, and why insurance brokers should be regulated again. Where insurance brokers are providing a service regulated for the purposes of the Financial Services and MarketsAct 2000, they will be exempt. However, providing services for a claim concerning an uninsured loss is not a regulated activity under the 2000 Act. Insurance brokers will therefore require authorisation. I could not agree more that the same activity should not be regulated twice. However, that does not mean that in some cases a particular business will need to be regulated by more than one regulator for different activities. We are working closely with the Financial Services Authority to ensure that the boundary issues that the noble Lord, Lord Kingsland, mentioned are appropriately dealt with. The noble Lord also commented on introducers under Regulation 12(5)(c). The regulations will apply in limited circumstances, as set out in Article 12 of the exemption order. We will have an opportunity for a full debate on that early in the new year. A numberof introducers are exempt. Many businesses refer a small number of cases either to solicitors or claims management businesses. It would be disproportionate for such businesses to be individually authorised. However, it is important that all businesses comply with the rules of conduct. The exempt introducer status has been introduced to deal with thissituation. The noble Lord, Lord Carlile of Berriew, asks why the Government do not insist on professional indemnity insurance at the outset. It was clear from responses to a consultation exercise during the summer that, although there is general support for authorised persons to have professional indemnity insurance cover, there are concerns about some businesses’ difficulty in obtaining cover at a reasonable cost in such a short timeframe. The Government intend to require authorised persons to have professional indemnity insurance, but want to ensure that the requirement is appropriately introduced and that there is sufficient market capacity to provide the relevant insurance. It has therefore been decided not to introduce a blanket requirement at the outset; we instead favour a phased approach. We are undertaking more detailed work on this to establish the exact nature and level of the insurance requirement, and how best it could be phased in during 2007-08. The noble Lord, Lord Carlile, also asks about the citizens advice bureaux. I confirm that not-for-profit and charitable organisations providing claims advice will be exempt. Again, this will be debated in the new year with the exemption order. The noble Lord also asks me to confirm that fees for criminal injuries and benefits claims will be prescribed. It is not intended that the regulator would prescribe or regulate fees which authorised persons may charge. However, authorised businesses will be required to operate transparently, including providing full information to consumers about the various charges and commissions paid when cases, insurance and loans are arranged in relation to consumers’ claims. Authorised persons must always act with honesty and integrity. This is a key principle of the conduct rules. At the point of authorisation, the regulator will consider the applicant’s practice or proposed practice in relation to the provision of information about fees. There will be firm rules of conduct. If companies break these rules of conduct, the regulator will take action, which can include suspension or cancellation of authorisation. The noble Lord, Lord Carlile, asked for confirmation of a compensation scheme in respect of solicitors. A compensation scheme is already available to persons making complaints about solicitors. This regulation is not intended to apply to solicitors, as they are regulated by the Law Society.