Fresh warning rocks Claims Direct

By ROSS DAVIES
Updated:

 

CLAIMS Direct has warned that pay-offs to disgruntled clients would help drive the 'no win, no fee' personal injury compensation specialist into a loss of around £20m. The shares lost 3 1/2p to 11p.

The company made an operating profit of £11.8m million before one-off items but will make a second-half loss. This will mean a pre-exceptional operating profit of 'not less than' £6m for the year to 31 March.

But this will become a pre-tax loss of approximately £20m after ex-gratia payments to clients, and a one-off cost of payments to underwriters to secure long-term underwriting capacity. One result is that there will be no final dividend to top up the 0.5p interim. The City had been expecting pre-tax profits of more than £16m.

The Claims Direct board said it 'believes' the reorganised group can regain operating profitability in the new financial year, chief executive Colin Poole said. Claims Direct warned of trouble ahead in January, and said a big TV campaign since then has not drummed up accepted cases to pre-November levels.

In November the company ran into complaints from thousands of clients that 'hidden' insurance charges left them with less compensation than they expected.

Until then, Claims Direct was getting 4,000 acceptable cases a month, but that fell to fewer than 2,500 as competitors weighed in and customers stayed away.

The figure is now stabilised at 2,500, although even in successful cases clients still find it hard to get paid by defendant insurers, Poole said.

Claims Direct is going to take on slow payers in the insurance industry, and is now covering clients against some deductions from the first £1,000 of compensation.

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