Half of law firms have ditched whiplash work, First4Lawyers’ research shows

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 ‘state of the market’ survey by the UK’s largest independent legal marketing collective spoke to 113 firms and shows the rapid pace of change since the Official Injury Claim portal was launched in May 2021. This time last year, a similar First4Lawyers’ study found that a quarter had exited the low-value RTA market and that has since doubled to 53%.

Just one firm says OIC cases are profitable; many of the rest say they continue to do them so as to capture the more valuable cases that fall out of the regime.

Firms still handling low-value RTA claims are seeing 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 say insurers are guilty of trying to persuade people to pursue claims without seeking legal advice.

One in three firms believe the government is 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%) are looking to run off or sell up. 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 may, at least in part, be attributed to a clear willingness to adapt to change. More than 80% of firms have upgraded their services since the Covid pandemic, with many now offering live chat and meetings online in response to customer demand.

First4Lawyers’ 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.”

Some 63% of firms say they were ready for the fixed costs extension, but a third also admit that they have had to change their model substantially to make claims work for them.

Clinical negligence is also identified as a growth area, with 44% of firms reporting an increase in case numbers over the last year, with 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 handle cases at that level.

Encouragingly, three-quarters believe that NHS Resolution, the body that handles litigation for the health service, is making genuine efforts to improve and promote settlements at an earlier stage.

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.”