Claims Direct alters policy to rekindle public faithINSURANCE: profit warnings show current state of businessClaims management company (CMC) Claims Direct last week launched an enhanced insurance policy which ring-fences the first 1,000 of any successful compensation for its clients, in response to public loss of faith in CMCs.The insurance policy costs 1,495 (plus insurance premium tax) representing an increase of 245 on the companys usual premium, but this is not payable by clients up front because it is funded by a bank loan.But Claims Direct chief executive Colin Poole acknowledged that insurance companies funding losing parties which Claims Direct expects to pay the premiums are not paying up.

They question the exact nature of the premium charged by Claims Direct.The companys efforts to stabilise its market position came as it issued a profits warning two days after announcing the new premium.

The warning predicted that the company would suffer a year-end pre-tax loss of 20 million auditors predicted a year-end profit of 20 million when the company floated last July.It attributed the problems to bad publicity, a poor response to advertising and insurers reluctance to pay.Claims Direct has now issued three profit warnings since flotation, two in the last two months.

Shares then floated for 180p have now plummeted to 12.25p dropping 14% within a 48-hour period following the latest warning.Meanwhile, the BBCs Watchdog programme, which focused on Claims Direct last November, has featured Accident Group, another CMC, over alleged pressurising of a customer.

Accident Groups Andrew Hopper told the programme: Nobody can guarantee that there isnt an occasional rogue salesman.Jeremy Fleming