Bad Publicity Shakes Claims Direct

January 26, 2001

The U.K.’s Claims Direct, an online insurance claims settlement service, has seen its business nosedive and its publicly held shares fall 55 percent following reports that it charged excessively high costs and fees for the cases it agreed to accept.

The company requires prospective claimants to to take out an insurance policy, costing around £1300 ($1900), payable to Claims Direct if their case is unsuccessful. The cost is now recoverable if the case is settled in the claimant’s favor, but only for policies issued after April 2000.

Some clients told the BBC, which did an television extensive report on Claims Direct in October, that they had received as little as two percent of the total amount of the claims settlement. The resulting bad publicity caused new business to decline sharply.

Founder Tony Sullman announced that he would no longer take an active management role. Claims Direct set up a £5 million ($7.35 million) fund in November to compensate claimants who felt they had received less than fair compensation, and the flow of new cases has somewhat increased, but hasn’t yet regained its previous levels.

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