With the war of attrition between solicitors and claims management firms set to continue, both sides are claiming the moral high ground, reports Nigel Hanson

As more accident intermediaries go to the wall, solicitors are stepping up their campaign to regain control of the personal injury legal market.


Thoughts of outright victory over the claims management companies (CMCs) may be premature, but lawyers are at long last gaining ground in the commercial war.


Four years after legal aid was abolished for most personal injury claims and unregulated CMCs started to exploit the 'no win, no fee' landscape, law firms are finally showing a willingness to stand and fight together.


New networks of personal injury solicitors are pooling resources to give the middlemen a run for their money, from Injury Lawyers 4U and Your Accident Lawyer in the north, to the Accident Link Network and South West Accident Network in the south, with many more in between.


Once a formidable opposition, CMCs have recently suffered a series of setbacks.


The tide began to turn when market leader Claims Direct collapsed ignominiously in 2002. The Accident Group followed suit last year. The Life Repair Group folded in December 2003, Accident Advice Group went down earlier this month, followed most recently by last week's announcement that Invaro is going into voluntary liquidation (see [2004] Gazette, 17 June, 1).


Meanwhile, two influential review bodies have been surveying the legal services battleground.


First, a report from the Better Regulation Task Force (BRFT) alleged that some CMCs' hard-sell advertising and direct-marketing encouraged people to bring ill-conceived claims such that 'ultimately, the whole sector was brought into disrepute' (see [2004] Gazette, 4 June, 3).


The task force also noted that solicitors' aversion to marketing contributed to the rise of CMCs.


The report said the companies 'earn their money by non-transparent and complex systems of referral fees and charges' and recommended, among other things, that the Department for Constitutional Affairs (DCA) should step in and regulate the sector unless the industry adopts a satisfactory code of practice - as approved by the Office of Fair Trading - by the end of 2005.


In the meantime, Sir David Clementi's review of the legal profession also includes the position of unregulated providers.


There is no hiding the animosity felt by many solicitors towards unregulated CMCs.


Nobody knows exactly how many CMCs are out there, but Ray Clewer, former chief executive of the Claims Standards Federation (CSF), says: 'There are between 200 and 300 reasonably sized companies out there and about 5,000 that are one- or three-man bands - those are the ones worrying us.'


Andrew Twambley, senior partner at Manchester-based personal injury firm Amelans, does not pull his punches about the worst offenders. 'They tried to rip out the life and soul of the market and gave my industry a bad name,' he says. 'They advertised by knocking on doors at night, by grabbing people in shopping precincts and encouraging them to have claims.


'They would sell what looked like a good claim to solicitors and exaggerate the strength of the case.'


He set up solicitors' marketing group Injury Lawyers 4U in November 2002 to bypass CMCs. The network has grown and this year closed its panel with 200 members nationally.


It is run without profit and simply refers calls from the public to solicitors on a strict rota basis. Each slot on the rota costs £15,000; the money is used to pay for television advertisements.


Solicitors will eventually re-conquer the market, Mr Twambley maintains. 'CMCs as a business model were a short-term concept that couldn't be sustained in the long run,' he says. 'Trust is the key difference that solicitors offer.'


Among his complaints, Mr Twambley claims some CMCs create hundreds of pounds in profit for themselves by charging £400 to £500 to refer a claim as part of a package tied to over-priced after-the-event insurance and expensive medical fees. Last month, the Court of Appeal upheld the decision of the senior costs judge, Chief Master Hurst, that fees of £310 paid to a subsidiary of The Accident Group that were purportedly for investigative work actually amounted to illegal referral fees.


Though CMCs are considering self-regulation with a code of conduct, Mr Twambley remains sceptical. 'They are trying to put on a respectable front, but I have no confidence in it,' he says. 'They bring nothing to the party - they simply take.'


While Mr Twambley and his allies take on CMCs at national level, other solicitors' groups are challenging them in the regions.


Firms in the south-east have rallied round the leadership of Jacqueline Shicluna, managing partner at Medway firm Stephens & Son. Six years ago, Ms Shicluna showed the way forward by setting up Medway Accident Link, which was followed by a much larger group, Kent Accident Link, involving 11 firms across the county.


Collaboration spawned more Accident Link groups in Surrey, Essex, and Wessex (Dorset and Hampshire). The groups target local markets, advertising on local radio and plugging the fact they are run by lawyers.


The local groups together comprise the Accident Link Network, an over-arching consultancy that advises firms nationally on tactics.


Ms Shicluna maintains that lawyers are beginning to chip away at the market dominance of CMCs.


'Solicitors are waking up to the fact that they have to do something to combat this,' she says. 'You are seeing greater co-operation between firms now. That doesn't come easily because we have grown up in an adversarial environment, but by working together, we can be stronger and face the common threat.'


So is victory in sight? 'It depends on solicitors continuing to want to co-operate and put in some work,' she says. 'We can't sit back on our laurels - that's a mistake lawyers have made previously. We often snatch defeat from the jaws of victory because we get complacent.


'These companies are commercially astute. They are regrouping and looking for opportunities. If we don't keep the pressure up, they will comply with whatever they have to and compete again.' She warns that brands take time to develop and solicitors must not have 'unreasonable expectations' of a quick fix.


The Personal Injury Network (PIN), set up by Brian Bluett, a partner at London firm Caladashins, is employing another stratagem, more akin to underground resistance. PIN, which was launched in February and already has 142 member firms in the UK and Ireland does not advertise at all.


But it relies, as Mr Bluett says, on the same 'spirit of co-operation as the other models'. Members refer a case to the network if they lack the particular expertise to handle it themselves.


Though solicitors are marshalling their troops, some CMCs are refusing to run scared.


Lawrence Beck, a director of Accident Advice Helpline, a CMC with 150 staff and national advertising, says the claims industry is now a 'very sophisticated marketplace' in which solicitors will struggle.


'A lot of the solicitors have chucked money into this and won't know what they will get out of it for another year to 18 months,' he says. 'I don't see why solicitors who have got together will be any more successful than marketing companies.


'What makes law firms think they are going to succeed? I suspect they won't - but it's a free market.'


Mr Beck, a former chartered surveyor, maintains that it is essential to get claims at the right price - something which he says requires business acumen more than legal skills.


Lawyers, he adds, are rarely available in the evenings when many claimants telephone after getting home from work, whereas his own staff work until 9.30pm - and speak a language people can understand.


He rebuffs complaints about CMCs bringing the sector into disrepute. 'Anyone who has come in to make a quick buck has suffered,' he concedes. 'People thought the business was a bit more straightforward than it actually is, but like any business in its early stages, you do get entrepreneurs coming in. Some come in to make a quick buck and disappear, and others are in it for the longer term.'


Mr Beck's prognosis of lawyers' chances may be too pessimistic, however, because it is clear firms are quickly learning the rules of the game. Carl Marston, head of litigation and personal injury at Stockport-based The Thrasher Walker Partnership, for example, is aware of the importance of making legal services more accessible.


He runs a free 5pm-7pm claims clinic each Wednesday and finds it a valuable way of attracting clients.


He also recently helped set up Your Accident Lawyer as a consortium for small-to-medium-sized firms in the north-west - it was originally established in Yorkshire by Wakefield firm Lister Croft. It charges members a £500 joining fee plus £2,500 per quarter, and is set to be rolled out as a national brand in August.


Mr Marston particularly objects to the fees that CMCs demand for supplying accident photographs and witness statements taken by unqualified staff.


He predicts a long, damaging battle for sector supremacy. 'I would love to say all CMCs are about to go under, but I don't believe it,' he says. 'It's possibly going to be a war of attrition. Hopefully the claims companies will start falling by the wayside, but I think solicitors will be tarred by the same brush.'


Mr Beck dismissed criticism that CMCs charge steep fees as 'a bit of a myth'. 'We do charge a fee,' he says, 'but it's as a solicitor's inquiry agent, which means that we are doing work the solicitor would have needed to do anyway and would have to have absorbed from their fee. In the past, I think some companies would just treat their investigation service as a disbursement.


'In my view, we under-charge. To put a proper claim together involves between four to six hours' work. If you think what a solicitor would charge for that, it doesn't bear thinking about. A lot of solicitors evidently think we are value for money because they take cases from us.'


Nonetheless, he concedes that CMCs have a bad reputation and probably rightly so, as a sector, which is unfortunate for companies like his. 'In the long-run, though, it may be good for us because the ones that will survive will be the ones that add value.'


Colin Ettinger, president of the Association of Personal Injury Lawyers, says there is insufficient money in the system to cover CMCs' referral fees, investigation fees and insurance premiums.


'It shouldn't just be looked on as a business enterprise,' he adds. 'It should be client centred to make sure you get a good deal for them. Most personal injury lawyers choose to do this type of work because they feel they can do something for people who are injured, but I don't get that impression from CMCs.'


He says some CMCs became 'greedy' and resorted to 'questionable tactics', including inspecting court records to obtain case details in order to poach clients. 'Their methodology was wrong. It hasn't been done in an ethical way, frankly,' he says.


Jay Doublard, director of Blackpool-based Personal Injury Helpline (PIH), which has about 40 staff, says the definition of a claims management company is a grey area. 'We are a claims management company but first and foremost we are a marketing company,' he says.


His company prides itself on a strictly ethical approach, he says, and makes its money by adding what he considers to be a reasonable margin to the costs of the case package it offers to solicitors, who also pay a panel membership fee for marketing expenses.


PIH does not charge claimants themselves anything and boasts that 15% of its cases follow personal referrals from other satisfied customers.


Mr Doublard doubts solicitors would be able to obtain the component parts of his packages any cheaper by other means, even though his company builds in a profit margin. 'Solicitors bill time and they don't realise that the easier we make their lives, the more time they have to put to the file and to their jobs,' he says.


Lawyers, themselves, are not without fault, it seems. Mr Doublard has excluded from his panel some firms that failed to meet his required standard of service.


'A lot of solicitors jumped on the bandwagon because it was the only area of law that they could make any money in,' he says.


So what does the future hold? 'I would like to think Clementi will say these companies should be regulated,' says Mr Ettinger. 'Not all are disreputable and some are doing worthwhile work, but I don't think people are going to give it much credence until there's a code of conduct.'


One way forward, he says, is to allow marketing experts to work alongside solicitors in multi-disciplinary partnerships - an idea floated by Sir David and supported by some in the profession.


'Lawyers could make sure the marketing is done in a certain way. It might work quite well,' he says.


CMC representatives concede the intermediaries need to smarten their act but they are confident self-regulation will suffice.


Mr Clewer says: 'I believed the industry itself needed cleaning up and consumers wanted that too. They wanted something they could rely on. There are so many one-man bands out there now that we need some control.'


Clarifying fees is a priority, he says. 'The fee charged should be very up-front so the client knows what it is. I don't believe people should expect something for nothing - they should know what the costs are in the first place, then decide.'


Mr Clewer, a businessman who sold his own chain of bakeries and cyber cafes in Wolverhampton before venturing into claims management as a referral agent, adds: 'Because of the large companies that have gone down, no one wants to put money into the marketplace,' he adds.


Mr Clewer continues in an advisory role but recruited former Metropolitan Police commander, Tony Burns-Howell, to take over as chief executive of the newly formed CSF at the end of April. The federation, the product of a merger between the Personal Injury Federation and the Claims Standards Association, is trying to present a unified face for the industry and take forward recognition of a code of conduct. A working party facilitated by the Law Society has been putting together the draft code.


Mr Burns-Howell, who retired from the Met in 1989 and has served as a director of Dixons and House of Fraser, is an academic at Leicester University, specialising in crime risk and security management.


He is unwilling to comment on the overall state of the claims market, saying he has not been in the post long enough to form a view.


In a carefully worded statement, he points out that the draft code might in due course be endorsed by the Office of Fair Trading, and he anticipates the 'creation of a structure and organisation within the CSF designed to put the consumer at the forefront when members are handling claims'.


As for BRTF's criticisms and solicitors' low opinion of CMCs, he questions what evidence the industry's accusers have. Recent research by pollster YouGov, he adds, has been critical of 'all players in the sector'.


With none of the players willing to capitulate, the war of words and commercial skirmishes look set to continue.


It remains to be seen whether Sir David Clementi will drop a bombshell that changes the contours of the battlefield in a way that gives one side a decisive edge.


Nigel Hanson is a freelance journalist