New Warning From Claims Direct

Claims Direct, the U.K. company that handles accident victims compensation claims on-line, issued a new profit warning on Wednesday, estimating that it would have pretax losses of £20 million ($28.65 million).

The company is still suffering from bad publicity last fall, when a BBC program featured interviews with a number of people who had used its services, who claimed that their awards had been substantially reduced by its fees and charges. New cases promptly dropped from around 4000 a month to 2500.

Since then Claims Direct has modified its fee structure, and undertook an advertising campaign to restore consumer confidence, but so far it’s had a negligible affect on new business. It also paid out £15 million ($21.5 million) to secure long term insurance coverage, and paid out over £5 million ($7.16 million) to compensate its disgruntled customers.

The company still hopes for profitability next year, and is currently in talks with the Association of British Insurers and the Law Society of England and Wales to reach an agreement on the recovery of legal costs.