Around 70,000 personal injury victims who are fighting their case through The Accident Group (TAG) are likely to have to pay £35m out of their collective winnings to make up a shortfall to the stricken company's banks and insurers.
The payment, which will reduce each claimant's winnings by about £500, is reminiscent of the controversy that engulfed TAG's rival, Claims Direct, and is a serious blow to its chances of selling itself as a going concern after going into administration last week.
Claims Direct hit the headlines two years ago when it emerged that compulsory insurance premiums were wiping out customer payouts. The company never recovered from the public relations disaster and last year went under.
TAG last week caused its own stir when it admitted to sacking 2,400 employees by text message after the company ran out of money to write new business.
The no-win, no-fee company, now in the hands of administrators PricewaterhouseCoopers, is preparing to fend off claims from employees who say TAG has not paid their commissions and fees.
Clients of TAG who succeed in winning their cases--estimated to be about 70 per cent of its existing 100,000 customers--may still receive money because the company's policies guarantee a minimum payout of £500. But their winnings may be significantly reduced.
Under the terms of TAG's policies, personal injury victims have to take out an insurance policy of between £800 and £900. The company hoped the sum would be recovered by compensation payouts.
According to sources close to the company, TAG's customers are liable to make up most of the shortfall, which must be paid to the policy insurers and to TAG's bankers.
Separately, Arriva confirmed it started investigations of over 400 claims submitted by the Manchester-based injury claims firm following speculation that many of the claims might have been fraudulent.Reuse content