Claims Direct has introduced a revised insurance policy that lets claimants keep the first £1,000 of any settlement.
The move precedes its latest trading statement, which is later this week after a profit warning in January.
The decision to revise its insurance policy follows talks between Claims Direct and its four Lloyd's underwriters, which have led to the personal injury insurer securing “substantial” additional underwriting capacity, believed to amount to £10m.
Chief executive Colin Poole said the company would continue to operate on a “no-win no-fee” basis,
but that for all new clients who won their cases the first £1,000 of their compensation would be free of deductions, except for interest on any loan used to pay for the cover.
If claimants receive damages of more than £1,000, they are guaranteed this minimum amount, but must
pay a contribution toward their
insurance premium and loan interest.
However, in order to ensure they receive at least £1,000 claimants must pay an additional £245 on top of Claims Direct's existing standard policy costing £1,250. This gives a total cost of £1,495.
The company has been criticised
by the media, particularly by The
Sun newspaper, for claiming its £1,250 premium from each successful claimant's compensation settlement.
Claims Direct said it had been forced to do this because a dispute with liability insurers meant they
were refusing to refund the cost of winning claimants' premiums.
Poole said the new policy would safeguard a proportion of the damages due to claimants and remove the uncertainty caused by insurers refusing to pay insurance premiums by way of costs.
“We very much want to resolve the dispute with insurers but this may take time,” he said. “In the meantime, the policy will help clients.”
Claims Direct's existing policy costs £1,250 plus insurance premium tax and will continue to be funded
by clients from an interest-bearing bank loan.
Claims Direct's business is
brokered by Charles Knight and partners to four Lloyd's underwriters: Alleghany as lead underwriter and Catlin, Goshawk and ME Denby and Others syndicate 608.