Relaunch delays at Claims Direct will push loss to £22m

Claims Direct, the troubled no-win, no-fee personal injury specialist, yesterday warned losses would widen this year despite reassuring investors last year the worst was over in the company's turbulent history.

It said full-year losses were expected to be £22m for the year to 31 March, up from £20m last year. Claims Direct's shares fell 20 per cent to 9.25p.

The company said the widening loss was due to the fact that problems had cropped up which meant it was not able to launch a new business model on time.

The company was hit by a barrage of bad publicity last year after it emerged that thousands of customers had seen personal injury settlements virtually wiped out because they had to pay expensive insurance premiums out of their claims.

Claims Direct bought rival firm Claimline in January. As part of the deal, Claims Direct said it would bring down the cost of insurance by reducing the overall cost of its agreements with customers. It had anticipated having the new policies up and running by now but has only just begun to roll them out.

The main cause of delay was because Claims Direct had to negotiate a release from a contract of solicitors which used to be controlled by Claims Direct's former chief executive Colin Poole. Claims Direct had to pay £2.3m to sever its links with Poole & Co.

Mr Poole and Claims Direct's former chairman Tony Sullman sold their stakes in Claims Direct last year to Simon Ware-Lane, a private investor.

The company has also had to negotiate with angry former employees called franchisees who have lost income because of the bad publicity attached to Claims Direct. The company handed over £3.5m in compensation to nearly 200 former franchisees and still has to settle with six.

Ronnie Henderson, the new chief executive, said new business should pick up. A key legal case which is being heard in the House of Lords next month is expected to support Claims Direct's argument that insurers should pay the entire cost of the policy in personal injury cases, so that the individual involved does not have to pay the insurance part of it.