Claims management companies: The Good, the Bad and the Ugly

Claims management companies in the UK are regulated by the Ministry of Justice under the Compensation Act 2006, covering personal injury (such as road traffic accidents or accidents at work) and financial compensation claims (such as Payment Protection Insurance).

Regulation was introduced to deal with widespread malpractice in the industry – from misleading or aggressive marketing in approaching consumers, to outright fraud with respect to upfront fees charged for financial claims.  

Although it has succeeded to a degree, there remains a sizeable minority of firms that can give the industry a bad reputation – in 2010/11, 349 firms had their licenses removed by the Ministry of Justice.  From a total of 3,367 registered firms at the end of 2010, this meant that 1 in 10 firms were either found to be in breach of rules or failed to meet the regulator’s requirements for authorisation.  This obviously does not count the ones yet to be audited.

The MOJ’s report states: “In the worst cases, the reasons for action included evidence of fraud, misleading marketing and aggressive sales techniques… Particular areas of malpractice [include] misleading marketing, unauthorised trading and failure to refund fees paid by customers.”

At the more serious end of the scale, the fraud referred to includes staged accidents, including at an organised crime level.  Misleading marketing and unauthorised trading are considered less serious but are symptomatic of the sizeable minority of rogue firms that give the sector a bad name.  The failure to refund fees amounts to theft, but can be avoided by not paying an upfront fee.

Fortunately the ‘good’ companies still outnumber the ‘bad’ and the ‘ugly’.  But it does mean that there is an uncomfortably high probability of you coming across a claims management company (CMC) with dubious standards.  That you are looking for one suggests you need help with a compensation claim, whether for personal injury or financial mis-selling.   The last thing you need in these circumstances is to be further let down by others.

In order to understand how to identify a good firm from the others, it helps to look into what it is that CMC’s do, and how they do it.

All businesses and individuals providing claims management activity are legally obliged to be authorised and regulated by the Ministry of Justice.  This includes the following areas:
• Personal injury
• Criminal injuries compensation
• Employment matters
• Housing disrepair
• Financial products and services
• Industrial injury disablement benefits

The CMC will manage your claim, either through its own staff (for example, many types of financial claim) or by outsourcing it to one of a group of solicitors they have a contractual agreement with (for example, personal injury claims).  Most CMC’s will have a large panel of solicitors as this provides a greater range of expertise and flexibility in dealing with claims.

The sector is a fragmented one, with 1,500 authorised CMC’s for personal injury claims and 1,200 for financial claims.  Whilst there are a handful of large, well financed companies in each sector with sophisticated marketing and customer service operations, and turnover counted by the tens of millions of pounds, the majority of CMC’s are small outfits – in 2009/10 the average turnover for financial claims operators was £87,000 and £170,000 for personal injury CMC’s (Source: Ministry of Justice).

However size in itself is not a reliable indicator of the quality of a CMC.  The areas of greatest concern for the unwary claimant are usually poor standards and poor ethics.


Price is not usually relevant to anyone making a personal injury claim as they keep 100% of their compensation without having to pay towards the cost of making the claim under the ‘no win no fee’ system.  

However in financial claims, there are many companies that charge a front end fee, usually called an ‘administration’ or ‘processing’ fee.  This can run into hundreds of pounds and should be avoided – any reputable company will only charge you upon the successful completion of your claim. If they say they are unable to take your claim on without a significant front end payment, this either means they do not have the confidence that your claim will succeed, or they lack the financial resource to operate until the claim is paid.


The methods used by CMC’s for acquiring new clients range from ‘push marketing’ to ‘pull marketing’.  Push marketing includes actively contacting people who they believe are eligible to make claim, including by phone, email or text.  Pull marketing consists of letting prospective clients know that they offer the service but allowing them to make the first contact because they are suitably convinced by their credentials.

Push marketing in itself is not prohibited or unethical.  However it is strictly regulated as to how clients may be contacted, and this is one of the most common areas of malpractice in the industry.  For example cold calling – where the client is contacted without their prior consent or an authorised referral – is strictly prohibited by the Solicitors Regulatory Authority.  Yet this does not stop many firms from buying data lists (for example where you had to provide your contact details in order to enter a competition and inadvertently agreed to your data being used in this way) and sending out blanket texts or conducting aggressive telephone sales campaigns using automated dialling systems.  

Pull marketing includes advertising and search engine optimisation whereby the website is ‘optimised’ (in its construction and in external links to other websites); in order to feature highly when a potential customer searches for specified keywords, such as ‘compensation claim’.  If you see a CMC that advertises widely or is on the first page when you do an online search for ‘compensation claim’, this is an indication of financial resource and marketing knowhow.  It is a good start for assessing a firm’s competence, as significant resource in these areas usually means sophisticated systems will be in place throughout the company.  

The presentation of the advertising as well as of their website (which is effectively a form of advertising) can be a useful clue as to the nature of the firm.  A professional and well executed presentation is not in itself a guarantee of overall excellence but its presence indicates high standards, which are usually reflected throughout the organisation.  

More importantly than the presentation though is the content – unscrupulous firms will make outlandish claims with regard to past successes (often in the form of bogus testimonials) and what you are likely to receive as compensation. For personal injury claims it is accepted practice to use the JSB Guidelines (established in 1992 to help establish consistency in claims valuations, and currently in its tenth edition).  Any website that promises you more or unrealistic timescales in completing your claim is misleading you in order to gain your trust.

Ministry of Justice rules require CMC’s to hold a signed copy of each testimonial they feature from past clients.  If you are not sure about the veracity of what is being portrayed as a success story for a CMC (usually on their website), then ask to see a copy of the signed original. If they are unable to substantiate this then what does that say about standards elsewhere in their operations?


CMC’s are governed by the Conduct of Authorised Persons Rules 2007, established to ensure standards for the benefit of the consumers that they provide a service to.  They include provisions that are easy to enforce, such as the requirement to have professional indemnity insurance in place, as well as complaints and refund procedures.   They also have broader principles that are less easy to measure and therefore regulate, but nonetheless provide the yardstick by which our industry must define itself in order to shut out the misbehaving minority.  

1. A business shall conduct itself with honesty and integrity.
2. A business shall conduct itself responsibly.
3. A business shall be directed by people with the necessary competence.
4. A business shall ensure that any staff or other people working on its behalf have the necessary training and competence to perform their duties.
5. A business shall observe all laws and regulations relevant to its business.

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Disclaimer: The above article is meant to be relied upon as an informative article and in no way constitutes legal advice. Information is offered for general information purposes only, based on the current law when the information was first displayed on this website.

You should always seek advice from an appropriately qualified solicitor on any specific legal enquiry. For legal advice regarding your case, please contact Hamilton Brady for a Consultation with a Solicitor on 0844 873 608.