The number of UK claims management companies will radically fall under regulation, the Claims Standards Council (CSC) has warned.
Claims management regulation took effect this week, with claims regulator Mark Boleat promising a crackdown on rogue firms.
Staffordshire Trading Standards, which is policing the sector would be "identifying the problem areas and cracking down," Boleat told Insurance Times.
Boleat added that the authorisation process had already driven out many dubious practices, but further examination was needed of the cold calling practices used by some firms.
The CSC said government proposals to bring about the end of the referral fee market together with stronger regulation would be a "double-pronged attack" on CMCs.
Andy Wigmore, policy adviser to the CSC, said: "CMCs are there to operate as a service, and they should be operating ethically.
"Lawyers will capitalise on the regulator's position on referral fees and consequently what we will see is a third of the market disappearing in the next 12 months.
"Those who are left must rebuild trust with the consumer."
Insurers are being urged to ensure that the cases they receive from CMCs have been obtained in a compliant manner.
Boleat said: "Malpractice does not directly disadvantage the consumer, it hits the insurer. The consumer will be generally affected by premium levels, and this is what we need insurers to be aware of."
