Half of Legal Firms Wave Goodbye to Whiplash Work, Our State of the Market Survey Finds
Research by First4Lawyers has revealed that many law firms are deciding not to deal with lower-value road traffic accident claims due to whiplash reforms.
Close to two-thirds of those discontinuing such claims have wound down their activities in the past 12 months, facing challenges in making claims financially viable under the new regulations. Many have diversified to survive, but a rocky road lies ahead: one in three firms might have to make “significant changes” to their business models to cope with the recent application of fixed recoverable costs to most civil claims valued at up to £100,000.
Our State of the Market 2023 survey included 113 law firms. Findings show how things have changed since the launch of the Official Injury Claim (OIC) portal in May 2021. A year ago, a similar study found that 25% of firms had left the small car accident market. Now, that number has doubled to 53%.
Only one firm said they make money handling OIC cases. Others continue to handle OIC cases to capture more lucrative cases falling outside the regulatory framework.
Firms still dealing with these claims are seeing the recovery periods for whiplash injuries go up (30%), as well as a rise in non-whiplash injuries (26%), and legal disputes about non-injury aspects like credit hire (20%). A third of firms say insurance companies are guilty of encouraging customers to make claims without getting legal advice first.
One in three firms believe the government is going to carry on squeezing fees, with further consolidation leading to volume players dominating the sector. Almost one in 10 firms are looking to run off or sell up.
Of those firms who are holding steady, a third have diversified into other personal injury areas. Over a fifth say they have started handling more diverse consumer claims, including data breach, energy bills, financial mis-selling, and housing disrepair.
However, despite the disruption, the firms generally seem in good health, with 43% reporting higher turnover and 52% higher profits in the past year.
This might be because firms are changing with the times. Over 80% have made their services better since Covid, with many now offering online chats and meetings because customers want them.
Our Managing Director, Qamar Anwar says: “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.”
Clinical negligence: an area for growth
Clinical negligence emerges as a growth area, with 44% reporting increased case numbers and corresponding rises in turnover and profit. However, the proposed introduction of fixed costs for claims up to £25,000 next year may impact the 68% of firms who say they handle such cases.
Qamar Anwar adds: “With further costs reform to clinical negligence claims on the horizon, it is positive to note that most firms have seen an improvement in the way the NHS handles litigation.
“Clinical negligence is a complex area and lawyers do an enormous amount of due diligence to filter out spurious claims.
“Resolving rather than resisting those cases where liability is clear will not only save claimants the time and upset of needless negotiations, but it will also help keep costs down so is surely a win-win for all involved.”
