Claimant solicitors predict “sharp contraction” of PI market

The Civil Liability Act reforms will lead to a sharp contraction in the claimant personal injury (PI) market, according to a survey of lawyers this week.

The survey by legal marketing collective First4Lawyers predicted firm closures and staff redundancies as a result of the changing PI market.

Of the 109 lawyers that responded, 42% said their firm had seen profit decrease over the past year (it had increased for 30%), while 46% said cashflow had worsened and 40% had seen staff numbers reduce. Almost half said the cost of doing business had increased.

However, only 13% of respondents believe the Civil Liability Ac reforms – including the increases in the small claims limit – will lead to their firm closing. 

While 41% said they would have some impact, but their firm was sufficiently diversified to cope, and 21% said the lower small claims limit for non-RTA cases would allow them to adapt and survive.

All respondents anticipated redundancies across the sector over the next 18 months, with most predicting that the trend towards mergers and WIP sales will continue, while the cost of marketing for non-RTA work would rise too.

Looking ahead to the reforms coming into force in April 2020, 61% said they expected the number of firms to fall, leaving a small number of big practices.

Many said they expected a new breed of claims management company to become the dominant handler of low-value work.

Asked how they expected claimants to react to the new regime, 59% predicted that they would turn to CMCs, while half thought they would either not bother claiming for smaller sums or insurers would pressure them into low settlements.

Respondents whose firms handled clinical negligence work indicated that the last year had been tough for them too, although not as bad as for their PI colleagues. However, most expected their caseloads, turnover, profit, cashflow, staff numbers and investment in marketing to stay the same or increase over the next 12 months.

First4Lawyers managing director Qamar Anwar said: “Our findings paint a picture of a market in great flux. With just under a year to go until the reforms come into force, firms still have time to decide how they are going to face the future and adapt to meet the challenge. 

“In the short term, the deadline has already produced greater competition for work, adding greater pressure to the PI market in recent months as firms look to make the best of the current regime. 

“The overall message is that the claimant legal sector needs to plan how they are going to tackle this year and those to come in the future. The reality is that many claimants will still need and want their help, and we know that solicitors are looking at ways of delivering this in an efficient and effective way. 

“Ultimately, it will be in the public interest for the profession to continue to help injured people and ensure that insurance companies do not take advantage of them under the new unequal regime.”