Insurance claims firms are breaking consumer rules

Claims management firms are misleading consumers about their cases in a bid to encourage them to let the firm handle their claims, allege consumer champions Which?

After calling 25 claims firms posing as consumers, Which? mystery shoppers found all the firms broke Ministry of Justice rules.

Six firms told the callers they would have more chance of a successful claim or would receive more compensation by using a claims firm than if they continued with their own case, despite being banned from making such comments.

Which? also claims three firms wanted upfront fees to take cases on.

Typical fees for a managing a claim were around 30 per cent of the compensation received.

The definition of ‘compensation’ varied between firms.  In some cases, the fee was not only calculated based on the lump sum consumers might receive, but also  includes any reduction in future loan repayments as part of the compensation. 

As a result, says Which?, some people could receive far less compensation than they expected, and in some cases, even owe the claims firm money. 

Richard Lloyd, executive director of Which?, said: “Claims management companies must clean up their act.  All too often, consumers are being misled about their chances of success and how much they’ll have to pay – the last thing people need if they’ve already fallen victim to the PPI misselling scandal.”

Now, Which? is calling for the ministry to implement some new recommendations:

  • A ban on cold calling and upfront fees
  • All terms, conditions and fees to be published online, making them freely available to consumers without a requirement to share any personal information
  • Fees to be based only on compensation paid directly to the consumer
  • Claims firms to advise upfront of free options to make a claim
  • A ban on claims firms stating they improve chances of success or an increased payout compared to making a claim independently

“We look forward to the Ministry of Justice taking swift enforcement action where appropriate, based on the findings of our investigation,” said Lloyd.

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