A freedom of information (FOI) request from Broadstone, a leading independent financial services consultancy, has revealed that the number of firms authorised to provide regulated claims management services has fallen markedly in recent years.
Since the Financial Conduct Authority (FCA) took over regulation of the sector from the Claims Management Regulator (CMR) in April 2019, the number firms operating in this part of the market has fallen for every single one of the past seven years.
The number of firms authorised to provide claims management services in April 2026 is now just 483, nearly halving from 942 when the FCA started to regulate the market.
There was a particularly notable drop of 24% between April 2020 (923) and April 2021 (704). This is likely to have been a consequence of the new FCA authorisation, rules and fees regime and claims management companies (CMCs) pre-empting the FCAs later introduction of fee caps.
FOI made by Broadstone: the number of firms authorised to provide regulated claims management services since the FCA took over from the CMR on 1 April 2019.
The FOI was made by Broadstone after the FCA announced a review into the claims management sector in May 20261. The regulator said that the probe was launched “following concerns that consumers are being failed by some CMCs and law firms.”
Phil Smith, Head of Redress at Broadstone, commented: “The sharp decline in the number of authorised claims management firms since the FCA took over regulation reflects a market that has come under far greater scrutiny and regulatory pressure in recent years. Higher standards around governance, conduct and consumer outcomes have undoubtedly raised the bar for firms operating in the sector.
“While increased oversight has helped drive out some poor practices, the FCA’s decision to launch a fresh review highlights that concerns around consumer harm and poor behaviour have not gone away entirely. This has been reflected in the multiple warnings issued around the motor finance compensation scheme.
“The challenge for the regulator will be ensuring consumers remain properly protected without reducing competition and access to redress services too far. Firms operating in this market will also need to demonstrate robust controls, transparency and clear value to consumers if they are to remain sustainable under the FCA’s more intensive regulatory framework.
“From a consumer point of view, people should fully understand what they are signing up to, what fees may apply and whether free-to-access routes such as the Financial Ombudsman Service are available before entering into agreements.”
|
