Response by Thompsons Solicitors - August 2006

About Thompsons

Thompsons is the UK's most experienced trade union and personal injury law firm. It has a network of offices across the UK, including the separate legal jurisdictions of Scotland and Northern Ireland.

Thompsons only acts for trade union members and the victims of injury, never for employers or insurance companies. At any one time the firm will be running 70,000 claims.

The firm participates regularly in government consultations on legislative issues.

Thompsons’ position

Thompsons acts primarily for trade unions and their members. Trade unions represent over six million consumers and their families.

Thompsons welcomes the DCA’s agreement to exempt unions from these regulations. We are though concerned that some aspects of the regulations may still impact adversely on the unions’ ability to continue to offer the high quality legal services to their members and their families that referred to by the Lord Chancellor in March 2005 as the “foundation stone to a progressive and fair society”.

Thompsons is also concerned to ensure that the regulatory function properly protects all consumers. Injured people, and those whose employment rights have been breached, must be protected from the actions of those whose interests lie not in the principle of access to justice, but in profit above all.

It is vital that regulation has real teeth and does not give claims management firms and liability insurers a licence to continue to exploit vulnerable people.

Fundamentally, we believe any rules governing the conduct of claims management firms should require no less than the Certification Officer requires of trade unions and the Law Society requires of solicitors.

Inexplicably it is proposed to exclude liability insurers from regulation. Daily contact with liability insurers in real cases, which clearly those who proposed this do not have, makes clear that this is entirely misconceived.

Our response to Question 4 of the consultation on Part 2 includes an appendix of examples of how insurers do not act in the best interest of claimants.

Thompsons’ response

Thompsons notes that the consultation on this part of the Compensation Act is closely linked to that on draft conduct rules for authorised persons and while two sets of regulations are proposed, it is necessary to cross refer them to respond effectively.

As a result, the firm’s response will look at the issues and questions in both consultations together.

For further information:

Jennie Walsh
Head of Media
Thompsons Solicitors
Congress House
Great Russell Street
DD: 020 7290 0025

Thompsons Solicitors
August 2006

Consultation on Part 2

Responses to questions

Question 1. Are there any other sectors that should be included and why? If there are any specific areas that should be included please give details and relevant evidence to substantiate this.

Subject to the response to question 2 below, Thompsons believes the sectors listed at paragraph 14 of the consultation paper are the most appropriate at the outset.

The firm agrees the exemption for the four groups listed in Paragraph 7 on page 3 of the consultation paper. Our response takes this into account.

Question 2. What comments do you have (if any) on the precise definitions for the areas to be covered?

Regulation 4(3) of the draft Regulated Claims Management Services Regulations (C(RCMS)R) have some significant omissions.

  1. Death by disease or accident should be covered.
  2. Claims involving the Motor Insurers Bureau should be covered.
  3. Claims following assault, false arrest or imprisonment should be covered.
  4. All employment rights cases should be covered. In relation to employment we do not agree that specific types of claims should be listed because there is often a range of issues in a case and consumers may not know what type of case they have or be able to identify their case type from a list. Developments in the law may introduce new rights not covered by the categories listed.

Paragraph 4(3) (c) should make reference to matters within the jurisdiction of the Employment Tribunals.

Question 3. What comments do you have (if any) on how the activities should be defined? What other activities (if any) should be specified in the Order and why?

The list of activities at Regulation 4 (2) appear at this time to be both comprehensive and appropriate.

Question 4. Is it appropriate to exclude third party capture by liability insurance companies? It would be helpful to have evidence to support any arguments.

It is not appropriate to exclude third party capture by liability insurance companies. See Appendix for evidence and case examples of how insurers give poor service to consumers.

There is a clear conflict of interest for liability insurers which sell Before the Event insurance whilst providing legal representation through a panel.

Under Law Society Rules solicitors would be prevented from acting for both parties in a similar situation having a financial interest in the outcome of a case and there should be no other approach on such a fundamental issue of conflict.

Liability insurers have a bottom line financial responsibility to shareholders. The temptation to apply pressure on a claims handler to, say, fail to fully advise on quantum or to avoid liability altogether where a claimant knows no better is too great to accept a lack of regulation.

The FSA has never regulated the activities of liability insurers in this area and has no experience of doing so. Nor does the FSA prevent mis-selling, though it may provide a remedy to those who are knowledgeable enough to take action when they become aware of the problem.

Liability insurers fail in their responsibility to admit liability as often as they can. They should be encouraged to offer rehabilitation whether a claimant is represented or not. That they offer rehabilitation, some of which is of questionable quality and relevance, is not a reason to exempt them from regulation.

One leading insurer has stated on more than one occasion that they do not see why they should advise people of the right to seek independent advice and representation and so does not. Others need encouragement to do so.

The Association of British Insurers recently issued a report claiming to show that unrepresented claimants receive higher compensation. Thompsons has questioned the methodology behind the report, and believes the ABI’s motivation in commissioning it is based on a desire to restrict access to justice.

Thompsons wonders why it is that trade unions had to jump through hoops to be exempted from the regulations, yet the DCA is offering to exempt insurers without question and with no grounds other than “no evidence of consumers receiving poor service”.

It must be recognised that liability insurers:

a) operate through panels of solicitors who they select, to whom they often provide a significant part of a firm’s case load and who they therefore have a financial hold over;
b) unlike unions where there is a fundamental commitment to ensure high quality, low turn downs and maximum damages, insurers and their panel law firms need only a superficial interest in quality, actively want to see cases turned down and have no commitment to maximising damages, in fact quite the reverse.
c) sell cases to panel solicitors, seeking significant referral fees when they pass on claimants they have “captured”;
d) don’t pay panel firms if a case is lost;
e) over-sell BTE ie by including it in domestic policies when the policy holder already has cover, say, through a trade union.

Question 5. Paragraph 11 (5) sets out the factors that the Regulator may take into account in assessing whether to grant authorisation to an applicant. Are there any additional factors that should be included?

Paragraph 11 (5) of the draft Claims Management Services Regulations should also include factors relating specifically to address bad practices in the field of claims management activities.

Sub paragraph (g) should not be limited to information about fees. It should include information about alternative support and funding arrangements, specifically the claimant/policy holder should be asked if they are a trade union member or if a member of their family is because if they are they will have access to high quality, genuinely free, legal advice and assistance.

The key issue for Thompsons is that the Regulator must have teeth. The opportunity for discretion when considering an applicant’s suitability to provide a regulated claims management service should be removed. There must be one, transparent, consistent approach.

Question 6. Does paragraph 11 (6) set out all the factors that the Regulator should take into account in deciding whether an individual is suitable to provide regulated claims management services or to be involved in the management or ownership of a claims management business?

We refer to the comments made above in relation to question 5. The principles also apply in relation to this question and Regulation 11 (6) of the draft C(CMS) Regulations.

The factors should be no less than the Law Society rules.

Question 7. Are the mandatory requirements for obtaining authorisation sufficient? Please give reasons for your answer

Whilst we have concerns about enforcement and efficacy of regulation, as stated above, we believe that the mandatory requirements appear sufficient.

Question 8. What should be the minimum requirements for PI insurance? What types of claims management businesses will have difficulty in obtaining the appropriate cover?

There is overlap between this question and Q6 of the consultation on draft conduct rules for authorised persons.

It is a key element of the business of claims management, that the consumer is assured of redress in the event of negligence or fraud. Claims firms should be required to carry professional indemnity insurance.

Not for profit membership organisations, because they almost always contract their work to a third party, and because their commitment is to their members, should not be required to carry it. The insurance held by the third party should be sufficient.

If an organisation cannot demonstrate a policy of insurance, it should instead be required to demonstrate appropriate “self insurance”, based upon a minimum sum per case and therefore an ability to pay for its mistakes.

Question 9. What other comments (if any) do you have on the draft Regulations?

This is a complex set of issues and the consultation process reflects that. Thompsons wonders why there is a need for more than one set of Regulations at this time.

Thompsons welcomes the recent inclusion of unions in the Claims Management Regulatory Consultative Group.

Consultation on draft conduct rules for authorised persons

Question 1. Are there any additional points that should be included in the conduct rules?

In our view, the conduct rules must mirror Law Society rules, for example in the client account provisions, and the Certification Officer rules also in relation to accounts.

Businesses must also ensure that clients fully understand the contract between them, by way of signed agreement that the contract has been read and understood.

Question 2. Is the distinction provided for in the rules between all businesses, those that have a contractual relationship and those that manage claims, a sensible one?


Question 3. Are the general principles in paragraphs 1 to 4 appropriate?

No. Businesses should be obliged to act in the interests of the individual victim, free from conflict and above any obligation to shareholders or other similar profit motive. The laws and regulations that must be observed must be no less than Law Society rules.

Question 4. Are all the factors that would exclude a person from being involved in claims management services appropriate?

Yes, but there should be an additional exclusion for those who have been or worked for or been a proprietor (including shareholder) of an individual, organisation or business that has breached these rules and in any case after authorisation has been cancelled.

Question 5. Should the tied agent concept be provided for or should any individual or business that provides claims management services be authorised in its own right?

Any business providing claims management services should be authorised in its own right.

Question 6. Should holding professional indemnity insurance be a requirement for authorisation? Would it be possible in practice for authorised businesses to obtain such insurance from the outset or should requirements be phased in to allow sufficient time for a market to develop?

See response to Q8 above. In general, non-membership, for profit organisations should be required to have PI insurance or demonstrable self insurance or assets.

Question 7. Are the requirements in paras 11-14 sufficient or would more guidance be helpful in respect of a model complaints scheme?

Thompsons notes that no time has been set for a substantive complaint to be adjudicated on. There is also no stated right of appeal to an outside person or body.

Again, Law Society and Certification Officer rules re complaints must apply. Where a business is a sole practitioner, complaints should be addressed directly to the regulator.

The complaints and appeals processes to the regulator must be clear and transparent. Who the regulator reports to in the respect must be stated.

We would support a model complaints scheme.

Question 8. Should specific rules on training and competence be developed? If so, are there suitable models which could be considered for a small sector?

The professional bodies of the regulated businesses should be consulted on what training and professional qualifications are required. For example, the Chartered Institute of Marketing (CIM), which now includes the Institute of Professional Sales, provides industry recognisable qualifications and training and development programmes which it may be necessary to require regulated businesses to participate in.

To do so would ensure that claims management businesses do not fall foul of the high professional standards required by the CIM in respect of how they market their services. Staff trained in appropriate, targeted marketing techniques, and required to demonstrate this through CIM qualifications, would be unlikely to adopt some of the highly dubious methods that have brought the claims management industry into disrepute.

Question 9. Are the general principles in paragraph 1 appropriate?

See our response to Q1 above. While they are broadly appropriate, we again stress the need for all rules and general principles to be equivalent to Law Society rules, which place an obligation on us as solicitors to be clear, transparent and not misleading in our conduct.

An additional rule should be included, which is contained in Law Society rules, which obliges a regulated business to include information about alternative support and funding arrangements, specifically the claimant/policy holder should be asked if they are a trade union member or if a member of their family is because if they are they will have access to high quality, genuinely free, legal advice and assistance.

Any organisation offering legal services must be required in writing to tell a client that these services may be provided for free and that the client should check this before signing the contract.

Thompsons makes this point elsewhere in this consultation response, including at Q13 below.

Question 10. Should only cold calling in person be prohibited or should this be a wider prohibition?

It should be wider for non-membership organisations ie in person or by other means. However, Thompsons believes that an exemption from this rule is justifiable for membership organisations who should be entitled to call their members.

Membership organisations are prevented under the Data Protection Act from parting with or selling their lists to other bodies, so members are protected from cold calling in that way.

Question 11. Are the proposals on advertising and sales generally appropriate?

We would propose that adverts carry a small logo which would confirm that the business is authorised and regulated.

Question 12. Is 14 days appropriate for a cooling off period?


Question 13. Are the requirements for the taking on of business generally appropriate?

See our response to Q9 above.

A regulated business must be obliged to include information about alternative support and funding arrangements, specifically the claimant/policy holder should be asked if they are a trade union member or if a member of their family is because if they are they will have access to high quality, genuinely free, legal advice and assistance.

Question 14. Are the arrangements for managing a claim appropriate?

Point f) should be made more explicit. It should stipulate that nothing in the financing of a claim shall allow a claims firm to pressurise a solicitor to repay any fees paid or to turn cases around faster than is appropriate to the client’s best interests in terms of the outcome of the claim.

If the real drive in these regulations is to improve quality then regulated companies should be made to demonstrate that quality. We would propose that regulated businesses are obliged to post an annual return to the Regulator - which is published - giving turn down and average damages recovered per case type.

Question 15. Is the provision in respect of taking reasonable steps to ascertain whether the client has BTE insurance sufficiently clear?

Thompsons does not believe that the steps that must be taken are sufficiently clear. Exactly what the business does to ascertain whether the client has BTE is not spelt out and so leaves what must be done open to interpretation.

A regulated business must be obliged to include information about alternative support and funding arrangements, specifically the claimant/policy holder should be asked if they are a trade union member or if a member of their family is because if they are they will have access to high quality, genuinely free, legal advice and assistance.

Question 16. Are the provisions in respect of arranging ATE insurance appropriate?

A regulated business must be obliged to include information about alternative support and funding arrangements, specifically the claimant/policy holder should be asked if they are a trade union member or if a member of their family is because if they are they will have access to high quality, genuinely free, legal advice and assistance.

Question 17. Are the arrangements for providing loans reasonable?

The business must be obliged to advise as to alternative funding arrangements, including that trade union membership, and trade union friends and family cover, would not require any loan.

Question 18. Are the arrangements for handling money appropriate?

The rules governing the handling of money must mirror Law Society rules, which also include the requirement to account for interest on client money.

Question 19. Are the proposed arrangements for informing clients of the Regulator’s decision to suspend, cancel or vary authorisation appropriate?

Thompsons believes that informing clients should be done by way of an agreed form of words. This would include the fact that the claim is not affected.

The proposal that the client be referred to the Regulator’s register of authorised people for alternative providers is problematic since it assumes that the claimant will be sent a list of other regulated businesses rather than a list of law firms with experience in the particular field.

To avoid any suggestion that the Regulator is favouring one firm or company over another, how any register has been compiled by the Regulator must be transparent.

A list of names, with no further information, may be confusing to the individual who may be driven by concern about any time limits in their claim to opt for the first name on the list, which may not be the most appropriate legal service provider for them.

It must be spelt out to claimants in these circumstances that if they are a trade union member, for example, they can seek advice and legal representation through their union.


All the cases listed below are real cases taken by Thompsons and demonstrate how liability insurers consistently deny, delay or try to under-settle claims. Those where the claimant was initially unrepresented illustrate how insurers seek to buy off claim and rely upon the claimant’s lack of experience in such matters to settle the case for below its value.

A number of these examples also illustrate the impact that raising the small claims limit in personal injuries cases, as called for by the insurance industry, will have, with claimants going unrepresented and therefore unaware that their claim would have been worth substantially more.

Road Traffic Accident: £500 to £2,250

Mrs M was involved in a road traffic accident and made a claim herself against the driver’s insurance. She received an offer of £500 compensation.

On the advice of a friend she came to Thompsons and on return of receiving our letter of claim, the insurer upped the offer to £1,250, even though there was still no medical evidence. Once the medical report was received the case settled for £2,250.

No new evidence but 100% more

Mr H submitted a claim through his employer’s insurers, who sent him for a medical and subsequently offered £1,000 for his injuries. He asked Thompsons for advice on the offer and, without obtaining any further evidence, we were able to settle the claim for £2,000.

£200 and no medical but injured has long-term hearing problems

Ms C was browsing in a “Claire’s Accessories” shop when a board fell hitting her on her neck, shoulder, head and ear. She complained to the company and received an offer of just £200.

Ms C, who has suffered hearing problems since the accident, then instructed Thompsons. We obtained medical evidence that indicates a value far more than £200. Further medical reports are needed.

A full and final settlement disguised as an interim deal

Mr T was involved in a road traffic accident and was off work for six months as a result.

He initially dealt with the claim himself. He received an offer from the insurer, before medical evidence was obtained.

The insurer’s letter suggested that the offer was for his injury alone and that if he continued to suffer he could go back for a further claim for damages. A subsequent telephone conversation with them, of which he kept a note, included advice that the settlement was just for the injury and he could claim for loss of earnings at a later date should it be necessary.

However, the form of authority sent by the insurer stated that the offer was in full and final settlement of all claims arising out of the accident.

At this point the claimant came to Thompsons and proceedings are ongoing against the policy holder.

Refusal to negotiate leads to £1,900 increase in costs

Mr D suffered six months of whiplash injury after a road traffic accident. Liability was admitted and the insurer made an offer of £1,325 and refused to discuss or negotiate further.

Thompsons made a Part 36 of £1,500. Because of the refusal of the defendant insurer to negotiate, it was necessary for the case to be issued and it went to assessment by the District Judge.

Significantly, Thompsons attempted to negotiate with the defendant’s counsel in the corridor before the assessment hearing. We said we would advise acceptance of £1,450. But the defendant counsel responded that her instructions from the insurer’s solicitor were not to negotiate at all.

At the assessment the claimant was awarded £1,450 plus 100% success fees amounting to £1,876.

If the insurer had accepted our offer, the success fee would have been 12.5% or £234 plus VAT of £41 – a saving of £1,929.

Never to work again “worth” £3,000. Now £30,000 and rising

Mr G, a welder, injured his back lifting at work. Repeated absences led to his employment being terminated and he has not worked in any significant capacity since.

He was examined by an expert whose opinion was that he was at a disadvantage on the labour market and advised he should do no heavy lifting.

The original offer made by the defendant’s solicitors on behalf of the insurer was just £750. This was then increased to £3,000.

The latest offer stands at £15,000. But with his losses calculated at around £30,000, the final settlement is likely to be much higher.

Tooth injury not a small claim

Ms C bought a mixed leaf salad from her workplace canteen, in October 2002. She bit onto an olive stone (which should not have been in the salad) and injured her back tooth. The tooth was fractured and required extensive and expensive root canal treatment.

She took the claim through her trade union and Thompsons wrote to the defendant’s insurer. There was no response within the pre-action protocol time frame so an application for pre-action documents was made and the defendant’s finally admitted liability after many more months and numerous letters.

Court proceedings were issued in September 2005 but the defendants refused to agree to allocation to the fast track as they felt the claim was a small claim, worth a maximum of £1,000.

At the allocation hearing, the judge accepted that the case should go to the fast track. The claim settled after the hearing for £5,150.