Claims management is big business, and 2021 looks set to be no different — despite the ongoing impact of COVID-19 on the economy. The pandemic may even trigger a spike in compensation claims as thousands of people have holidays and services cancelled or lose their jobs.
The amount paid out in payment protection insurance (PPI) alone currently stands at £38.3 billion (since January 2011), and there are many other types of claims that can prove lucrative for claims management companies (CMCs).
CMCs help individuals to claim compensation or refunds for products and services they have been mis-sold. It is an attractive business model for many entrepreneurs — help others while turning over a healthy profit — but is it the right business for you, and if so, how do you get started?
What Is a Claims Management Company (CMC)?
Claims management companies act as an intermediary between an individual claimant and the company or organisation against whom a claim is being made. The CMC handles the entire process on behalf of the claimant.
How Do Claims Management Companies Make Money?
CMCs charge the claimant either a fixed fee or a percentage of the amount awarded if the claim is successful. Some set their fee using both methods and many offer a “no win, no fee” arrangement.
What Type of Claims Do CMCs Handle?
Anything and everything. Some companies may choose to specialise in a particular niche, others will offer a broad service that aims to handle any types of claims that come their way.
If you start up a CMC, the type of claims you might process include:
- Unfair credit/debit card charges and interest fees
- Mis-sold mortgages
- Pension transfers
- Guaranteed asset protection (GAP)
- Packaged bank account (PBA) fees
- PPI (although the deadline for claims has passed, it is still possible to submit a claim under certain circumstances)
- Payday loans
- Flight delay claims.
Why Would Someone Pay a CMC to Handle Their Claim?
Anyone can submit a claim independently, but in today’s fast-paced world, the prospect of a company managing the entire process is extremely appealing. Sure, the claimant will lose a percentage of any compensation in fees, but if they are unable or unwilling to file a claim alone, a percentage of something is better than 100 per cent of nothing.
Some claims processes can be complex and take a lot of time and chasing to get a result. Many people will gladly pay a small fee to have someone else do all the legwork.
How to Start a Claims Management Company
- Do Your Research. Every type of claim is handled differently. Make sure that you have a good understanding of the processes and regulations involved in handling claims before advertising your services, or consider collaborating with a more experienced partner. A claims management company that has been authorised by the Financial Conduct Authority (FCA) can conduct any regulated activity in any of six sectors: financial service and products, personal injury, housing disrepair, specific benefit, criminal injury and employment.
- Register Your Company. In the UK, all claims companies are legally required to register with the Financial Conduct Authority. This process can take up to six months. In addition to making your business legally compliant, registering with the FCA will instil trust in prospective customers, as many people are wary of using CMCs and worry about being scammed.
- Decide on a Fee Structure. Are you going to charge a flat fee, a percentage of the amount awarded or a combination of the two? Will you operate on a “no win, no fee” basis? You will need to be open and transparent about your fee structure to attract customers.
- Prepare Information and Documents. Claimants will need access to clear, easy-to-understand information about the services you offer before they are willing to give you their business. You’ll also need to prepare documents such as contracts and terms and conditions.
- Invest in Powerful Claims Management Software. Automation is key to managing high volumes of claims efficiently. Claims management software will also make it quick and easy for customers to onboard themselves, allow you and the customer to track the progress of their claim and ensure that all the necessary paperwork is collected.
- Develop Opportunities for Upselling. Once you’re up and running, make sure that your sales team is making the most of the information provided by clients. Business-specific software will help keep client information organised and enable staff to spot opportunities for selling extra services. The most profitable companies are those that continually grow and evolve to meet changing customer needs.
2021 could be one of the best years to start a claims management company. Since the deadline for submitting PPI claims passed on the 29th of August 2019, a number of new areas of claims have emerged, such as packaged bank accounts (PBAs) and pension transfers. Furthermore, the current coronavirus pandemic could result in a flood of compensation claims due to lost services, income and even housing.
To start a successful claims management company, do your research, comply with the regulations set out by the FCA, invest in purpose-specific software and be proactive about finding opportunities for growth.