A sustained recovery in the personal injury (PI) market remains elusive, according to new research, as total claims numbers continue to decline and fixed fees exert pressure on profit margins. The latest report from IRN Legal Reports, titled UK Personal Injury Market 2024, reveals that while the PI market was valued at £4.3 billion in 2023—a 3.8% increase from the previous year—this growth is unlikely to lead to a robust recovery in the near future.
Market Dynamics
The report highlights a clear division within the PI market:
Low-Value Claims: Predominantly road traffic accident (RTA) claims, which are managed through high-volume, low-margin processes. These cases are resolved quickly but yield lower margins.
High-Value Claims: Cases involving serious injury or clinical negligence, which offer better margins but can be protracted, often taking years to resolve.
The ongoing trends are leading to a decrease in the number of legally qualified professionals needed to service the market, exacerbated by financial pressures on providers. Smaller firms, particularly those dealing with serious injury and clinical negligence claims, may struggle to cope with the extended timeframes for final payments and are likely to exit the market.
Impact of Fixed Fees and Market Exit
The report notes that the PI market’s situation might have been worse had fixed costs for low-value clinical negligence claims been implemented as initially planned in April. Currently, there are 3,637 firms engaged in PI work—a 4.3% decline since 2021—and 1,317 firms offering clinical negligence advice, reflecting a 5% drop over three years.
Declining Claims Numbers
Government reports and regulatory changes have contributed to a reduction in PI claims. Claims registered at the Compensation Recovery Unit have halved over the past decade, dropping from over 988,000 in 2014/15 to 477,420 in 2023/24. Road traffic accident claims now account for 73% of all PI claims, although this proportion continues to decrease annually.
Court cases related to PI claims have also seen a significant decline. In 2023, the number of PI court cases started dropped by 25% to 61,210 from 81,481 in 2022. This marks the largest decrease in court cases since 2017.
Emerging Trends
The report identifies several trends shaping the PI market:
Diversification: Many PI providers are branching into non-PI consumer claims areas to diversify their revenue streams.
Extended Claims Lifecycles: Backlogs and delays in claims processing are extending the lifecycle of many claims, intensifying cash flow pressures on providers.
Integrated Service Models
Around a third of leading PI providers have adopted integrated service models, managing the entire PI journey in-house. These models incorporate non-legal services such as accident management, rehabilitation, medical reports, and treatment. This approach helps reduce costs and enhances service quality for clients.
The outlook for a sustained recovery in the personal injury market remains uncertain, with ongoing challenges related to declining claims numbers, financial pressures, and the impact of fixed fees. The market’s shift towards integrated service models and diversification may offer some resilience, but the overall recovery is likely to be slow.
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