The number of the claims management companies has halved in the past five years as civil justice reforms continue to affect the sector.

Today’s annual report by the Claims Management Regulator says that the number of authorised CMCs has fallen from a peak of 3,213 in 2013 to 1,610 in 2016.

But there are signs the flux in the market has started to ease off: CMC numbers fell by just 142 in the past year and almost three-quarters of CMCs have been in business for more than three years.

Turnover in the personal injury claims sector has fallen by almost a third in the last year to £215m, largely due to the ban on referral fees in 2013 and subsequent restrictions on marketing affecting the industry.

The total income of the entire claims management sector is now £751.6m, of which £532m is made through financial products and services.

New applications to be authorised continue to reflect that fewer businesses want to be involved in the sector: the regulator received an average 16 applications a month in 2015/16, compared with 25 per month the year before.

Before the civil justice reforms, 40 applications were made each month.

The CMC regulator, run by the Ministry of Justice but due to be transferred to the Financial Conduct Authority, said the dominance of a few businesses made it difficult for newcomers to enter the market, while PI reforms also made it less attractive for start-ups.

In personal injury, the sector remains ‘polarised’ with a small number of large CMCs operating nationally, while most of the sector is made up of small, locally operated CMCs who have worked with a solicitor firm to adapt their business model to comply with the referral fee ban.

For many of these smaller CMCs, accident management activities including recovery, storage, repair and vehicle hire, have become more profitable than injury claims.

Noise-induced hearing loss claims fell ‘significantly’ in 2015/16, largely through enforcement action against non-compliant marketing and a drop in demand.

Nuisance calls related to NIHL have ‘significantly reduced’ following enforcement action.

The north-west continues to be the hub for personal injury CMCs, with 256 out of the total of 868 situated in the region. Greater London had the next biggest concentration, with 168 personal injury CMCs.

Overall during the year, the regulator issued 247 warnings to CMCs and made 1,196 visits. In personal injury, one investigation was commenced and 53 warnings issued.