Claim and counter-claim
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By Marianne Fitzjohn
Endowment Justice director Marianne Fitzjohn says that claim management firms came out if the vacuum for consumer legal services with life insurance companies trying to discourage compensation claims
I am frustrated about the lack of accuracy, balance and intellectual rigour in the debate about the alleged compensation culture in the UK, how it came about, who is involved and what to do about it.
There has been much debate in recent times about the compensation culture and how to tackle it. Much of the debate may well be sensible but it would appear that the real pressure that Government ministers are responding to does not come from hospitals or schools but from an insurance industry that wants to stop claims for compensation.The Association of British Insurers has been discourag- ing consumers from choosing representation in disputes over misselling of financial products.It is now even calling for lawyers to be excluded from 90 per cent of personal injury cases.One could argue that such moves are wholly inappropriate, regardless of the poor track record of the industry.The Government has been reforming legal services and the legislative framework pertaining to it. Presumably, it believes that the legal services industry is in dire need of reform.The legal reforms include successive pieces of legislation, such as the Access to Justice Act 1999, whose aim, simplistic- ally, was to allow greater numbers of people than before access to justice, with affordable legal services financed by new commercial arrangements in the absence of a then widely available legal aid schemeThe abolition of legal aid for many types of disputes and the slow response of established legal firms to the new market opportunities resulted in a vacuum for certain types of legal services, especially those adop- ting alternative dispute reso- lution processes.It is from this combination of events that the market for the services of claim management companies was created. The range of activities of CMCs is growing rapidly and they already operate in a broad range of areas, including involvement in claims for personal injury, criminal injury compensation, employment tribunals, housing disrepair, and financial services.Some CMCs have been criticised over various aspects of their operations, including inappropriate sales practices, misleading advertising, misselling of conditional fee agreements, poor quality and/or misleading advice, lack of transparency of processes and/or fees, and fears that CMCs will erode confidence in established legal services while fuelling concerns about a compensation culture. It is for these reasons that some parties are urgently calling for regulation of CMCs.Why seek further regulation of advertising when there is already effective regulation in place?Why reform legal services by providing access to justice and then complain about a compensation culture when people exercise their rights under the new legislation?Why complain about the nature and impact of no win, no fee agreements when conditional fee agreements are a fundamental feature of the Access to Justice Act 1999 and other legislation preceding it?Why complain about CMCs, when CMCs are a creation of the legal reforms?When the Government- commissioned review of legal services calls for modern- isation of legal services with increased competition, finding new ways of delivering legal services, simplified regulation, and improved customer service, why criticise approaches that are the vanguard of these reforms, arguing the case for more regulation?Criticisms now aimed at CMCs have been applicable to financial services firms. The financial services industry has persistently been penalised by its regulator since regulation took effect in April 1988.Who can consumers rely on to put problems right for them? The firms that misled them in the first place? Surely, this is a conflict of interest.Apart from the sheer scale of the problem, with millions of endowment policies having been missold, one of the most shocking aspects is that financial organisations are misleading their customers by trying to hinder or prevent valid claims and offering less compensation than the complainant is entitled to.This is not isolated to end-owments but is a concern for a wide variety of professional CMCs handling complaints on behalf of consumers.The FSA has meted out around £6.7m in fines to eight big providers for failings in relation to endowments alone.Despite this, firms continue to treat consumers unfairly, and the FSA has been criticised for not taking the problem seriously. It is no wonder that consumers look to CMCs for support when their trust in the system is breached for a second time.It appears that the financial services industry wants to have its cake and eat it. Having escaped the effect of a full pension-style review on endowments, it is trying to escape the consequences of legitimate complaints raised by individual consumers while claiming that CMCs are whipping up complaints with controversial advertising.The fact is that only legitimate complaints result in compensation. People cannot complain successfully in the absence of just cause, regardless of the activities of CMCs.I whole-heartedly support sensible regulation but know that regulation is not a panacea for the determined bad practices of a minority.The General Medical Council does not prevent bad doctors from harming patients. The Law Society does not prevent malpractice in legal firms.The financial services ind- ustry has had 18 years of regulation, yet the FSA has con- tinually had to intervene by enforcing even the most basic aspects of its regulations where compliant behaviour means less profit and it is still having to do so.Let us hope that future regulation is more balanced and that the new regulator is not just a puppet of politicians and powerful industry lobby groups. Somebody has to protect consumers' rights when the pressure to generate ever increasing profits directly conflicts with the need to treat customers fairly. Only then will consumer confidence be restored.
