In the Media - Data Analysis: PI Market Continues to Contract Following Whiplash Reforms
Personal injury law firms are exiting the market at an alarming rate following whiplash reforms.
The number of legal firms offering PI advice has dropped significantly in the past 18 months, with the introduction of the Official Injury Claim portal in May 2021 playing a key role in the trend.
The OIC portal was developed to allow road traffic accident victims with small personal injury claims to handle these without legal guidance, making the claims process for minor injuries (e.g. whiplash) quicker and more affordable.
The conventional explanation for the mass exodus from the PI market is that claimants have been able to handle smaller claims through the OIC portal, leaving smaller firms facing a corresponding drop in demand for PI-related services.
However, the lack of public understanding of the OIC portal and whiplash reforms has contributed to the service being underused.
Reports show that less than 10% of claimants using the portal do so without legal representation.
Andy Cullwick, head of marketing at First 4 Lawyers commented: “Even for lawyers, who deal with 90% of claims issued in the portal, it is hard to navigate and there are long delays, not least the large number of cases outstanding involving mixed whiplash and non-whiplash injuries.
“The resource required, and the tight margins imposed, means it is no longer financially viable for many firms, particularly those for whom lower-value road-traffic accidents made up a significant proportion of their caseload, to continue with this type of work."
With a market share of around £4bn, PI is one of the largest sectors in consumer law.
Consolidation has been a consistent theme in the sector since the whiplash reforms, with some estimates claiming that the top 25 PI law firms account for around 30% of the market, according to First 4 Lawyers.
For smaller firms, especially those specialising entirely in PI, the impact of consolidation has been severe.
In Liverpool last month, two claims firms with PI functions, MST Legal and Next Gen Solicitors, entered into administration on the same day.
The Solicitors' Regulation Authority figures demonstrate a steady drop in the number of registered solicitor firms since the institution of the reforms, with noticeable drops at key points in the past 18 months.
A noticeable drop in October 2021 of -0.8% on the previous month demonstrates the short-term impact of the reforms, with a further 2% drop in the following year reinforcing the trend.
More than 300 firms have dropped out of the market within the last 18 months, a noticeable decrease.
The drop in the number of registered firms also tells only half the story - many more firms are diversifying out of the market rather than simply dropping out.
Although the above figures do not pertain exclusively to firms with a PI offering, the significance of the personal injury sector within consumer law is such that the general figures still provide a useful insight. With the real impact of the OIC portal obscured by changes in driver behaviour during and after the pandemic, the future of PI law seems uncertain at best.
Claims volumes are at an all-time low, while public awareness and understanding of the portal remains scant, as evinced by the relative lack of unrepresented claimants using the service. Mike Brenner, chief executive of the Association of Personal Injury Lawyers, said: “It is clear that the market is in flux and with it comes the obvious concern about what the changes mean for access to justice for victims of negligence. For example, we can see that firms leaving the market, coupled with a lack of consumer awareness and understanding of the OIC, creates a justice gap."
"The sad fact is that the change which leads to firms pulling out of the market is not that fewer people are becoming victims of negligence."
