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Aipedia: Claims management companies
CMCs can automate success fee and termination charge calculations, but the regulators expect termination fees to be reasonable, proportionate and itemised. Errors become refunds, and refunds are not usually covered by PI.
Part of: AI in Claims management companies
In short
CMCs may use software and AI to read settlement letters, calculate success fees and set termination charges. Under the Consumer Duty fees should represent fair value, and the FCA and SRA said in February 2026, as reported, that termination fees must be reasonable, proportionate, itemised and clearly explained. Automated errors tend to repeat across every file, leading to complaints, Ombudsman decisions and refund exercises. Refunding overcharged fees is not usually a PI loss, and fines are commonly excluded, so prevention matters more than insurance here.
CMCs usually charge a success fee as a percentage of redress or compensation, and many agreements include a termination charge if the consumer cancels after work has started. Calculating these by hand across thousands of cases is slow, so firms may use software and AI to read settlement letters, identify the redress amount, apply the fee terms, and generate invoices and termination charge breakdowns. AI is also used to decide how much work was done on a file before cancellation, which drives the termination charge.
CMCOB also contains specific rules on fees for some claim types. Check the current FCA Handbook text or your compliance adviser before relying on any figure.
Illustrative scenario. A CMC uses an AI tool to read lender settlement letters and calculate success fees. Where a letter sets out both redress and statutory interest, the tool sometimes picks the wrong total. Elsewhere, the termination charge tool counts automated letters as hours of work and produces large charges for cancelled files where little was done. Consumers complain, the Ombudsman upholds several complaints, and the firm decides to review and refund across its book.
Errors like these are often systematic, because the same logic runs on every file. They also tend to fall on consumers in the worst position to challenge them.
Fair value is wider than arithmetic. Even a correctly calculated fee can be questioned if the service involved little more than an automated letter the consumer could have sent free of charge. As AI cuts the cost of handling each claim, firms should expect to be asked whether their fees still reflect the work and benefit they provide.
PI responds to claims that the firm's negligent professional services caused a third party a loss. Overcharging a consumer is different: refunding a fee simply returns money the firm should not have taken. Many PI wordings exclude or do not respond to the return of fees, and a past business review or customer remediation exercise is the firm's own cost. Regulatory fines are commonly excluded and may be uninsurable. Where a fee error goes further, for example an AI tool deducting fees from the wrong client's redress, there may be a civil claim that PI could respond to, subject to the terms. See how Consumer Duty and PI claims overlap and Does claims firm PI cover AI errors?.
Apex arranges PI for claims management companies and can explain what your policy says about fee disputes and remediation. See AI in claims management.
In their February 2026 joint message on motor finance claims, as reported, the FCA and SRA said termination fees must be reasonable, proportionate and itemised and explained clearly to consumers. For FCA-authorised CMCs this is framed under the Consumer Duty.
It can assist, but the firm is responsible for the result. Charges should reflect work actually done, be itemised and be explained clearly. Counting automated outputs as substantive work is likely to attract complaints and regulatory attention.
It is sensible. Fair value under the Consumer Duty looks at the price against the benefit the consumer receives. If automation means a claim needs much less work, a firm should be ready to explain why its fee still represents fair value, and record that assessment.
Usually not. Returning fees the firm should not have charged is not usually a PI loss, and remediation and fines are commonly excluded. PI may respond if a fee error causes a consumer a separate loss, subject to the policy terms.
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Start a PI quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.
