The collapse of claims management company Invaro has prompted calls for independent regulation of the after-the-event (ATE) legal expenses sector.
Arc Legal Assistance director Richard Finan said: "It is time for the ATE claims industry to abandon the drive for self and embrace full, independent regulation along the lines of the FSA model."
David Hartley, director of ATE services for Abbey Legal Protection, said the news signified the end for the current no-win, no-fee model.
"The model of claims companies as middle men has failed. Solicitors dealing direct with the public is the best thing for the public."
But Allianz Cornhill Legal Protection underwriting manager Peter Dobie said claims farmers would continue to play a part in the insurance industry.
"The general public do not think about the reputation of claims management firms. They will still respond to adverts and seek compensation.
"There will still be a place for that kind of firm."
Invaro and subsidiary Wishsprite were voluntarily placed into liquidation on 9 June.
About 70 people were made redundant. IGI Insurance, which had provided capacity for Invaro, said it had little exposure to the collapse. IGI said it had ceased providing capacity for the company in March 2004.