Shares in companies related to personal injury claims have been hit after a piece of small print in the government's Spending Review came to light.
Buried in chancellor George Osborne's announcement last week was a proposed consultation to remove the minor whiplash victims' right to compensation. By Thursday 26 November, after Investors Chronicle had gone to print, the ripples were being felt in the market, with shares in injury claims processor NAHL (NAH) and legal services company Fairpoint (FRP) down 25 and 11 per cent, respectively, and the shares have still not recovered.
Although NAHL thinks there is a "significant market for claims" below the revised smaller limit of £5,000, it acknowledged the consultation's impact is uncertain. Along with insurers, the government believes motor claims - abetted by the personal injury (PI) market - are riddled with fraud, and plans to remove the right to general damages for soft tissue injuries. NAHL somewhat optimistically believes regulatory changes could "further accelerate industry consolidation", and remove competitors.
Fairpoint's response was more bullish. The acquisition of Colemans in August had prepared it for changes to the small claims market, and could even allow it to benefit thanks to the margins and volumes at which it currently processes small claims. However, Simpson Millar, the law firm Fairpoint acquired in 2014, does offer PI legal services, generally focused on higher-value claims.
Shares in Quindell (WTG) would also have taken a battering last week had the group not sold its legal claims business to Australian-listed law firm Slater & Gordon (ASX), which lost over half its value following the announcement.
