'Third party capture' is the name given to the practice of contacting a third party claimant directly to make a settlement offer, rather than going through a legal representative. The practice is particularly common in motor claims, although the technique is sometimes also used in employers' liability cases.
The practice can result in quicker compensation for the victim as well as keeping down legal costs. But industry bodies and consumer groups have raised concerns that claimants contacted in this way may be pressurised into settling their claims for less. The Association of Personal Injury Lawyers, in particular, has been campaigning for third party capture to be more closely regulated.
The FSA maintains that the handling of all insurance claims is already subject to rules and guidance in the Insurance Conduct of Business Sourcebook. It has, however, recently carried out a review of third party capture. Its findings, together with some guidance for firms using the practice, were published in a factsheet earlier this month.
The review found that only a small proportion of claims were settled directly with unrepresented third parties. Many, but not all, insurers had procedures in place to protect the interests of particularly vulnerable claimants.
However, the paper states, "the data we gathered was inconclusive in determining if unrepresented third parties may have achieved higher compensation if they had legal representation".
The FSA also found gaps in insurers' record keeping that made it difficult to track what offers were being made and accepted.
The regulator concluded that, although third party capture did not necessarily cause detriment to claimants, there was a risk that in some cases claimants might settle without considering all their options.
The factsheet reminds insurers that settlement offers should be adequate and that insurers should treat third party claimants fairly. This includes making sure they are fully informed of their rights, including their right to independent legal advice and of the alternatives to settling directly with the insurer. The FSA warns that it will take seriously any evidence of impropriety in the handling of third party claims.
Insurers are also encouraged to review their own practices and procedures to ensure the interests of third party claimants are properly safeguarded and that proper records are kept of the firm's activities in this area. In addition, the FSA has updated its advice for claimants on its consumer information website, Moneymadeclear.
The Association of British Insurers is due to publish an industry code of practice on third party capture early next year.