An Australian law firm which operates in the UK personal injury claims business has lost more than half its stock market value after George Osborne proposed curbs on claims for whiplash injuries.
Shares in Slater & Gordon fell 51% to A$0.94 (£0.44) in Sydney after Wednesday’s spending review. The chancellor said the government would consult on ending the right to cash compensation for minor whiplash injuries. He also outlined plans to slash the legal costs by directing personal injury claims of up to £5,000 to the small claims court.
Whiplash costs insurers £2bn a year, or an average £90 per policy. The industry has campaigned for years to end what it calls an epidemic of claims.
In the eight years to 2013 the number of road accidents in the UK fell by nearly one-third, but soft tissue injury claims rose by more than 60%. More than nine out of 10 whiplash claims are submitted by claims management firms.
In the UK, according to insurance company Aviva, around 80% of personal injury claims are for whiplash injuries, compared to 3% in France.
Slater & Gordon bought the so-called professional services division of Quindell, the scandal-hit insurance claims company, in March. The law firm’s shares have plunged from A$7.85 since early April.
The deal, which left Quindell as a software company, increased the law firm’s reliance on the UK personal injury market. It had already expanded into the UK no-win, no-fee personal injury claims sector.
“Whilst the government’s announcement was unexpected, the company believes that the scale and diversity of the Slater Gordon solutions business in the UK positions it well to deal with the potential impact of any future legislative change,” Slater & Gordon said in a statement to the Australian stock exchange.
The law firm, which listed its shares on the stock market in 2007, said it did not expect Osborne’s proposals to affect its performance in the current financial year but warned they would reduce the rights of people injured in road accidents.
Slater & Gordon’s shares had already fallen heavily this year over Quindell acquisition and a probe by the Australian authorities into its own accounting. The Serious Fraud Office is investigating business and accounting practices at Quindell. Slater & Gordon said in August when the SFO announced its inquiry that it would not be liable for the results of the investigation.
Quindell, a former golf club, appeared to transform itself into a high-tech car insurance claims handling business before doubts emerged about its accounts and business model.
