Claims Direct reelingPremium Costs: company's share price more than halvedClaims management company (CMC) Claims Direct saw its share price more than halve last week after admitting that profits are likely to dip because it cannot get increased premium costs back from clients.Last month's trading statement read: 'Due to delays in the introduction of the enhanced insurance policy product...

the company has to date been unable to recover from its clients the increased premium costs payable to underwriters.

Gross margins have been significantly reduced...

the board anticipates [they] will be restored when the enhanced insurance policy is introduced in the near future.'Two of the company's executives are moving following the announcement: Paul Rew, head of legal, is standing down, and executive chairman Tony Sullmann becomes a non-executive director.

Chief executive Colin Poole said the two moves were unconnected to the trading statement, which saw shares - valued at 1.80 when the company floated last year, and later peaking at 3.60 - tumble to an all-time low of 42p.Mr Poole blamed increased competition in the market and hardening attitudes in the insurance industry for the fall.

He also acknowledged 'the negative impact on business from the autumn publicity'.

The company was criticised on the BBC's 'Watchdog' programme last autumn, and was also subject to a campaign by The Sun.Meanwhile, lawyers north and south of the border this week reiterated allegations that there are conflicts of interest between CMCs and solicitors.

Ronnie Conway, of Airdrie firm Bonnar & Co, who heads the Law Society of Scotland's speculative actions working party, said there was 'clearly a prima facie conflict between CMCs and the profession as a whole'.He said that the Claims Direct share dive constituted a publicity opportunity for solicitors north and south of the border to seize the case management initiative back from CMCs.

CFA expert Kerry Underwood of St Albans-based firm Underwoods said that acting for CMCs may put solicitors in breach of a practice rule that they should not pay for work.Mr Poole said: 'Claims Direct does not take referral fees from solicitors - I do not believe there is a conflict between Claims Direct and the solicitors profession.'Jeremy Fleming