Personal injury marketing business NAHL (NAH) slumps 13.3% to 195p as the Ministry of Justice (MoJ) publishes a consultation document on changes to whiplash compensation.
Nearly a year after they were first trailed in the 2015 Autumn Statement, the proposals seek to restrict victims' ability to claim compensation for minor whiplash injuries.
Law firms operating in this area may also face tougher rules on reclaiming legal expenses after a proposal to run more cases through the small claims court.
Personal injury claims of up to £5,000 will now be heard in the small claims court, up from an earlier threshold of £1,000.
Small claims court judges typically do not award legal expenses to the losing party.
CURRENT MODEL
In the cross hairs of this regulatory clampdown is NAHL, a personal injury marketing specialist. NAHL does not fund no-win no-fee claims itself but concentrates on marketing to generate leads for the law firms it counts as clients. It does this principally through the ‘Underdog’ character which fronts its core National Accident Helpline brand.
The company has modest direct exposure to road traffic accident claims but slimmer margins on personal injury cases are likely to lead to lower profits for the industry as a whole, which would in turn pressure marketing spend and hurt NAHL.
SOFTEN THE IMPACT
Since last year the company has been working to mitigate the impact of any changes. It has said this may include changing commercial structures so payments are deferred and/or NAHL takes on more of the risk but also more of the return associated with a claim.
In a response to the MoJ announcement it says: 'The group is currently trialing an initial small proportion of our enquiries through different commercial and structural arrangements to those we normally deploy and will provide an update on this initiative at the group’s full year results.'
These results should be out in March 2017.
'DISASTROUS PATH'
Law firm Carpenters said the new rules set the UK legal system on a 'potentially disastrous' path which would punish genuine accident victims and deliver no material reduction in insurance premiums.
The Ministry of Justice says reduced insurance pay-outs could reduce motor insurance premiums by £40 a year.
Other publicly listed companies potentially exposed to the new rules include Fairpoint (FRP:AIM), down 0.5% at 56p, and Redde (REDD:AIM), down 1.9% at 165p.
