PI firms diversifying after failing to make a go of whiplash claims

An increasing number of law firms are ditching low-value RTA claims as a result of the whiplash reforms, according to new research.
PI firms diversifying after failing to make a go of whiplash claims

Almost two-thirds of those that have stopped have wound down the work in the last 12 months after trying and failing to make claims profitable under the new regime.

Many have diversified to survive, but there is likely to be further turbulence ahead, with one in three firms having to “significantly change” their business model to cope with the recent rollout of fixed recoverable costs to most civil claims worth up to £100,000.

The survey of 113 firms by marketing collective First4Lawyers shows the rapid pace of change since the Official Injury Claim (OIC) portal was launched in May 2021. Last year’s First4Lawyers research found that a quarter had exited the low-value RTA market, and that has since doubled to 53%.

Just one firm said OIC cases were profitable; many of the rest said they continued to do them so as to capture the more valuable cases that fall out of the regime.

Firms still handling low-value RTA claims reported lengthening recovery periods for whiplash injuries (30%), an increase in non-whiplash injuries (26%) and the legal battle moving to non-injury elements such as credit hire (20%).

A third accused insurers of trying to persuade people to pursue claims without seeking legal advice.

One in three firms believed the government was going to carry on squeezing fees, with further consolidation leading to volume players dominating the sector.

A third of firms have also diversified into other areas of personal injury, up from a fifth in 2022, while 22% have looked beyond PI, entering a wide range of consumer claims areas such as data breach, energy bills, financial mis-selling and housing disrepair.

Almost one in 10 firms (9%) were looking to run off or sell up. However, despite the disruption, the firms generally seemed in good health, with 43% reporting higher turnover and 52% higher profits in the past year.

This may, at least in part, be attributed to a clear willingness to adapt to change, researchers suggested – more than 80% of firms have upgraded their services since the pandemic, with many now offering live chat and meetings online in response to customer demand.

First4Lawyers’ managing director Qamar Anwar said: “The personal injury sector has changed immeasurably over the last two years, but what is reassuring is the incredible resilience shown by the majority of law firms and their determination to survive and thrive, even in the face of so much upheaval and uncertainty.

“Unfortunately, we are likely to see even more of that following the extension of fixed recoverable costs which, despite being twice delayed, like the whiplash reforms before them still lack much needed clarity.”

Some 63% of firms said they were ready for the fixed costs extension that took place in October, but a third also admitted that they have had to change their model substantially to make claims work for them.

Clinical negligence was also identified as a growth area, with 44% of firms reporting an increase in case numbers over the last year, and turnover and profit up a similar amount.

But the proposed introduction next year of fixed costs for claims worth up to £25,000 will affect many, with 68% of firms saying they handled cases at that level.

Positively, three-quarters believed that NHS Resolution was making genuine efforts to improve and promote settlements at an earlier stage.

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