The Accident Group, the UK's largest personal injury claims company, called the administrators in yesterday blaming "continual battles with the insurance industry and the sudden failure of a banking partner to support the company" for its collapse.
The administrators, who have hoisted the "for sale" sign over the group, however, said the Accident Group had suffered from a "lower than expected claims success rate". This resulted in "increased insurance premiums on new business and retrospective claims from the underwriters", it said, adding: "This has led to financial difficulties."
Three other smaller subsidiaries of Amulet Group, which was set up in the Nineties by the flamboyant entrepreneur Mark Langford, have also been put into administration, including the personal finance specialist First Advice.
The company's collapse will be a blow for the Government, which abolished legal aid for personal injury claims and replaced it with laws that allow solicitors to operate on a "no win, no fee" basis. It is the second large personal injury claims group to collapse, after Claims Direct.
Accident Group - derided as an "ambulance chaser" by its critics - was set up to help victims of accidents pursue claims by putting them in touch with solicitors. It sells its customers insurance policies to cover them for their claims and their legal expenses if they lose their case. If they win, the money is then claimed back from the losing parties' insurers.
Industry experts estimated about 100,000 people would be left waiting to see if their claims would be processed. Michael Horrocks, the PricewaterhouseCoopers partner looking after Amulet, said he would seek to "ensure existing claims are handled in an orderly and expedient way". About 200 staff are expected to be retained by the administrators to help handle existing claims.
The company's collapse comes just weeks after two court rulings that appeared to tip the balance in the industry's favour in its ongoing dispute with insurance companies over disagreements over the legality and appropriateness of premium levels. The group's financial statement for the year to end-August 2002 showed that it had made pre-tax profits of £17.8m. However, it made a retained loss of £264,000.
The company's chairman, Mr Langford, last night said he was devastated by the group's collapse. "I don't like what has happened today, if it had been in my control I would not have done it that way," he told ITN news. "But it wasn't in my control."
Mr Langford added: "I built this business up, it was a very fast-growing business, we have employed 2,500 people here in Manchester and around the rest of the country, and until literally 48 hours ago we were fine to continue in business. It's all gone wrong in the last 24 to 48 hours."
When asked if those staff made redundant would be paid their May salary, Mr Langford said it was in the hands of the administrators. "I hope they do get paid. I have not had my salary," he said.
Staff reacted badly to the news yesterday, with some going on the rampage at the group's Birmingham office. By 9am, one former employee described the site a "a complete mess". Describing scenes reminiscent of Iraq after the toppling of Saddam Hussein, he added: "People had been here for hours and had taken anything they could get their hands on, computers, coffee machines, even the photocopiers had already been taken." Looters also took clients details, "selling them on to other solicitors for up to £250 each", he said.
Kabir Hussain, 22, a former sales representative, told The Independent: "They kept us working until the last minute. When it came to pay day, they got rid of us." Mr Hussain, who is owed about £3,000 before tax for his work for the company in May, said staff had "no idea" about the group's financial difficulties.
"Every week they would hold sales training programmes for 30 or 40 new people," he said. Like the rest of his former colleagues, Mr Hussain will have to apply to the Department of Trade and Industry to have any hope of recouping what he is owed.
Employers' groups were swift to attack the use of text messages, drawing comparisons with the situation at Vauxhall in 2000, when the car manufacturer's staff heard about their redundancy fate from a report on the local radio. Unions were also critical.
Derek Simpson, the joint general secretary of the union Amicus, called Amulet's behaviour "spectacular, even by current standards", adding: "It's no way to treat loyal employees who have been the backbone of the company."
Brendan Barber, the TUC's general secretary-elect, called for more powerful provisions for proper workplace consultation. "Nobody should be given devastating news about their employment by text message," he said.
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