Keoghs Insight


Samantha Ramen

Samantha Ramen

Director of Market & Public Affairs

T:07713 393534

Too many eggs... will they all hatch?


As those of us in the industry are aware, Carol Brady’s review was published last week.

Now, is it just me, or was there a missed opportunity around the timing of its publication? I can see why it happened this way – her review is, after all, referenced in the Red Book – but any publicity that may have been gained from this was lost in and amongst all of the noise around the Budget itself. Needless to say, this was further exacerbated by the somewhat sensational cabinet furore that erupted over the weekend.

This all means that we have heard little in terms of further detail from the Government as to their proposed action on CMC regulation. We know that “the Government accepts the recommendations of the independent review into the regulation of CMCs” and that it “intends to transfer responsibility for regulating CMCs to the Financial Conduct Authority”. This is positive; Carol Brady’s report clearly outlines that if the Government wants a step change, this is what will be necessary. However, when will this take effect?

Ms Brady does acknowledge that there will be disruption in the short term; whether this will be worth it or not remains to be seen.  Primary legislation is required to effect the Government’s intentions to transfer responsibility to the FCA; this is, therefore, unlikely to happen before 2017/18. My concern is that there are a number of projects running alongside each other which by their very nature are inextricably linked. Indeed, even the claims management regulator itself has a live consultation out at the moment which asks stakeholders’ views on fee restrictions for PPI claims; we can reasonably expect further consultations on the same for personal injury.

However, it’s the Autumn Statement reforms that rings the loudest alarm bells with me. From what we can tell, these will be implemented before the FCA transfer.

With so many uncertainties, how can insurers plan their businesses over the next three years? Can we, through an increase in the SCT limit and CMC fee restrictions, expect a cultural shift towards claimants processing their own claims in order to retain 100% of their compensation? Or will, for example, a fee cap simply encourage claimants to use CMCs; if they are seen as low cost and value for money, then actually this may do the opposite of what we all hope.

My guess is that any cultural shift will depend more heavily upon what the MoJ decide to do to enable claimants to claim for themselves. I hope that we are able to see some detail on this once the consultation is published.

And we must not forget that there is a considerable amount of pressure from the Government on insurers to reduce premiums by £40-£50 following the implementation of the Autumn Statement reforms. This is looking increasingly difficult to achieve; the Chancellor only last week announced a further increase in IPT. It seems bizarre for him to do so in the context of looking to reduce the cost of living - especially with the desired reduction in motor insurance premiums.

Of course, let’s not forget the elephant in the room. The result from the referendum on 23rd June will have far reaching implications for all Government policy, whether the electorate votes in or out. We must remember that we are dealing with a Government that is massively distracted from business as usual…and if the Brexit campaign triumphs, who knows what might happen to the leadership and its priorities?

I suppose a vote to leave will provide us with one certainty – we needn’t worry about Aspiro.