It is becoming increasingly commonplace to see TV ads telling you
that if you've had an accident you could be entitled to thousands of
pounds of compensation.
It should come as no surprise that personal injury claims firms are
eager for new customers: one estimate puts the potential value of this
market at pounds 4bn. And this for a sector which only started to
flourish last April, with the phasing out of legal aid for such claims.
Trumpeting themselves as champions of the little man wanting justice,
these claims firms hoped to watch the customers - and the cash - roll
Spending millions on straight-talking TV ads - The Accident Group (TAG),
has the slogan 'Where there's blame, there's a claim'. While Accident
Line is backed by the Law Society so is more circumspect, it still uses
TV ads along similar lines.
Amid protests about a US-style 'claims culture' sweeping the UK, this
sector has taken a media battering. Claims Direct, in particular, has
had little respite from bad publicity over the last year, despite an
pounds 18m ad spree. The company's tarnished image led to marketing
director Roger Plantier leaving this month, and CEO Colin Poole taking
on responsibility for marketing and communications.
The Sun and Watchdog have been keen to find claimants whose awards were
eaten away by the insurance premiums demanded by the company to cover
costs. They may operate on a 'no win, no fee' basis, but the flip side
seems to be 'big win, big fee'.
Claims Direct comes under the spotlight because it is the only listed
company in its sector, and has posted two profit warnings since going
public last July. TAG has also been subject to attacks from the media,
but has emerged unscathed because it is not obliged to put out press
releases announcing bad news.
Claims Direct spokesman Tony Baker says 'claim management' firms perform
a vital service that benefits those who otherwise might not pursue
claims out of fear of approaching a solicitor.
But he admits that apart from problems with its products, Claims Direct
had a flawed comms strategy, which didn't help when there were
'We advertised to get customers, and didn't spend time making our
services better known to opinion formers. Because the business grew so
significantly, we focused on day-to-day success rather than thinking
strategically about our partners - government and the insurance
industry,' Baker says.
Until recently, the company had no briefing materials on policy,
benefits, or terms and conditions. This led the media and insurance
companies to think the company was secretive. Suspicion of the sector
reinforced problems when the Access to Justice Act was introduced last
year to make things fairer for consumers, so if they win a claim, the
premium paid to the claims company comes out of the losing insurer's
coffers rather than the payout.
Claims Direct says it is making efforts to communicate better with the
media and stakeholders after introducing clearer policies, and the
emphasis is shifting from advertising to PR. 'We need to use the media
rather than just paying for it. Dealing with the media has been done at
too low a level and has been reactive,' says Baker.
Golin/Harris Ludgate is the company's financial PR agency and has
handled crisis PR since Claims Direct featured on Watchdog last
MD Reg Hoare says he has advised the company to get its house in order
internally, and carry out a programme of education with journalists:
'There was a great deal of ignorance about what the company did, so when
bad news came out, it was reported in a misleading and hysterical
fashion. Another problem has been that bad news just kept coming, and
they've been on the back foot the whole time.'
Hoare believes the efforts the company is making are showing signs of
having an impact on perception. They are also helping the share price
but there's a way to go before the 35p shares get anywhere near last
year's high of pounds 3.50.
At litigation PR specialist Cicero Consulting, CEO Stephen Lock is still
troubled. He says the reason the 'no win no fee' process works in the US
is that the claimant only has to insure against losing the case and
paying their own legal costs - each side bears its own costs whatever
the outcome. In the UK, the loser has to pay the other side's bill
'If you have a little guy taking on a council, their legal bill will be
huge and the amount the little guy might have to stump up is potentially
vast. To make the numbers work they have to charge huge premiums which
are sometimes totally out of kilter with the potential award,' he
Lock's distaste with 'ambulance chasers' is such that he doesn't believe
there is any PR strategy which will change things for the claims
companies: 'The problem is the existence of these firms,' he insists.
'Consumers should be looking for before-the-event insurance, not
after-the-event - there are a variety of personal accident insurance
policies which include litigation cover.'
Claims Direct and its competitors may be trying to clean up their act -
they certainly are trying to project that message. But it will take some
PR job to appease those who believe they shouldn't exist in the first