When former Claims Direct co-founders Colin Poole and Tony Sullman offered 10p per share for the legal expenses insurer, shareholders were understandably furious. After all, the duo floated the company in July 2000 for 180p per share, making Poole and Sullman multi-millionaires overnight.
Things started to go wrong quickly for the pair.
In October 2000, The Sun and the BBC's Watchdog programme were hounding the company over high premium levels that left claimants out of pocket. Shares slumped and Sullman stepped down in January 2001. He was followed by Poole in June 2001.
Almost immediately, Poole and Sullman bid 10p a share. The stock stood at 14p per share. Shareholders branded them opportunists and worse.
The future looked bleak. Poole and Sullman were expected to delist the stock, leaving shareholders with shares they couldn't sell. But the pair now look like they have done something that may salvage the industry's image from this sorry affair. They have gained control of the firm and will sell on the shares at no profit to Simon Ware-Lane, owner of Claimline.
Ware-Lane would have found it almost impossible to buy all the stock he needed under existing stock market rules. So Poole and Sullman have done him a favour. And, as Ware-Lane will not delist, shareholders will have the chance to stay with the new management or sell their stock. In a round-about way, the duo have done something good for the shareholders at last.
But the reputation of the industry has again gone down in the eyes of the business community. As Patrick Snowball said recently: “It looks like we don't know what we're doing.” Of course, 99.95% of companies in the general insurance industry know what they are doing. Unfortunately, it looks like the Treasury's new financial troubleshooter Ron Sandler will not look at how the Financial Service Authority regulates the industry (see page 11).
So it's up to us to put our house in order and tell the world that the UK insurance industry is world-class.