Tardy lawyers 'owe Claims £10m'

CLAIMS Direct is owed more than £10m in overdue debts by the lawyers to which it passed business, the compensation specialist said today.

Chief executive Ronnie Henderson said the courts were taking longer to resolve cases than estimated and lawyers had delayed paying Claims Direct's referral fee of £395 a case until they had been settled. He said it was now pushing to recover the money within the agreed nine-month term.

Henderson also said Claims Direct was facing a £3.3m bill for paying out franchisees. That was part of a new business model in which more clients would deal directly with the company rather than through these agents.

This lower cost base meant Claims Direct needed 1,800 cases a month to break even compared with 2,300 under its previous model. It has settled with 21 of the 26 former franchisees that had taken legal action against the insurer.

The company lost £11.5m for the six months to 30 September, from a £10.3m profit last time. It blamed the upheaval associated with its successful hostile takeover by founding directors Colin Poole and Tony Sullman, and the controversy over its business methods.