Insurers could be forced to comply with the same rules as claims management companies, raising the prospect of double regulation for the insurance industry, Insurance Times can reveal.
Sources close to the Department for Constitutional Affairs (DCA) said this week that any company participating in the "activity" of claims procurement - effectively buying and selling personal injury claims to and from law firms - will come under the new claims regulator's remit. This would include liability insurers, law firms and legal expenses insurers, which are already regulated by other bodies, such as the FSA.
The move would be a controversial interpretation of the regulatory regime set up under the Compensation Act, which was introduced to regulate claims management companies.
Some believe that claims management companies are putting pressure on the DCA to introduce a set of rules to apply to all insurers.
One DCA aide said: "The activity must be regulated. If insurers are participating in third-party capture activity - if they capture claims in any shape or form - they will be regulated. The rules will be out by the end of September."
This will mean that all major composite insurers, excluding AXA, which does not participate in claims procurement, will need to have regulatory approval by 1 February 2007.
The DCA is ahead on its timetable to have regulation in place. Firms wanting to be regulated will need to begin registering in November.
Insurance industry sources warned of a potential "feeding frenzy" in claims procurement before the regulations came into force. "That is why it is so important for the DCA to press ahead quickly with its plans," said a senior source.
Justin Jacobs, ABI head of liability, said further regulation would be "ludicrous". He said: "The DCA needs to decide whether it is going to work under the wishes of the lawyer fraternity or within the workings of the better regulation principles."
