Slater & Gordon unveils major strategy shift for ex-Quindell business to improve PI win-rates

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20 November 2015

Grech: clear direction for SGS

Grech: clear direction for SGS

Slater & Gordon has changed the strategy of the personal injury business it bought from Quindell and is now generally not accepting low-value road traffic accident accident (RTA) claims that are more than a year old because they are harder to win, it has emerged.

Speaking at the company’s annual general meeting in Australia overnight, managing director Andrew Grech explained that the work it had done since acquiring what is now called Slater Gordon Solutions (SGS) five months ago showed a correlation between the time taken for a client to seek legal advice after an accident, and the quality of the case.

He was referring specifically to cases that go through the Ministry of Justice’s (MoJ) RTA portal.

“Based on our experience, we consider this action will have a positive impact on ease of processing, insurer behavior and likelihood of success,” he said. It will take on older cases where there are “specific extenuating circumstances”, such as the seriousness of the injury.

The announcement could inadvertently influence government plans for further reforms for whiplash cases. It emerged during a parliamentary debate this week that the upcoming report of the insurance fraud taskforce – set up at the start of 2015 by the Treasury and Ministry of Justice – will address reducing the three-year limitation period, as well as whether to raise the current £1,000 limit for personal injury small claims.

Mr Grech said that along with other process changes, SGS will deal with fewer cases than anticipated, while “actual client intake will now also be lower in FY16 by approximately 6,000 cases because of the end of the Swinton contract”.

It emerged in July that the country’s biggest high street insurance broker had brought the agreement to an end just months after it signed a multi-year renewal.

The overall result will be the SGS will bring in 73,000 cases over the year to 30 June 2016, rather than the previously estimated 95,000, while case resolutions would be around 70,000.

In all, RTA is expected to make up 95% of SGS’s “core legal cases”.

This would in turn lead to lower file loads for fee-earners, “enhanced client engagement and greater resolution willingness from insurers”, Mr Grech said. He indicated that marketing spend would also go down in line with the lower case load target.

Whilst SGS would not replace the Swinton volumes “overnight”, Mr Grech announced that it had reached a deal to provide its motor services to leading broker Brightside Insurance, which should make up around 35% of the lost volume.

Mr Grech said a review of the noise-induced hearing loss cases it bought on a conditional profit sharing basis with Quindell has stood up its estimate that 40-50% would be successfully resolved.

Mr Grech said the firm has taken “important strides in charting a clear direction for [SGS], which is markedly different from how it was run by its previous owners”.

He explained: “In multiple areas, we are seeking to reset relationships with counterparties, including insurers, business introducers and suppliers, in line with [our] corporate values.”

He told shareholders that the company remained “convinced of the strategic merit” which underpinned the acquisition of SGS.

“There is a great deal of activity underway to ensure that we achieve our overarching goal of securing the leading position in the UK personal legal services market, which is not only four to five times the size of the comparable Australian market, but one consolidating at an accelerated rate…

“The addition of SGS has meant that we have achieved our goal of becoming a leading personal injuries law firm in the UK. We believe that taking a leadership position in the UK will provide us with a durable competitive advantage as it has done in Australia, without the need for further acquisitions in the near term.

“The SGS business is large and multi-faceted. Delivering its operational and financial targets will be a key area of focus over the next few years.”

M­r Grech admitted that the whole of Slater & Gordon’s UK business has had a “slower than expected start” to the 2015/16 financial year, which he attributed to the “impact of staff integration activities”, including moving all staff – except for those who joined recently through the acquisition of Walker Smith Way – to a single practice and case management system.

This has caused “some loss of productivity… [which] has impaired case resolution rates across the personal injuries law group”. Delays caused across the PI sector by the introduction of medical report system MedCo has also contributed to this, he added.

The MoJ portal practice has been affected by lower than expected resolution of cases, in part due to MedCo. “Our expectation is that the MoJ practice will improve markedly in the second half, however some ground has been lost in the first six months which we will not make back.”

But in all, although cash flow would also be hit in the first half of the financial year, Mr Grech said the full 2016 results should be in line with his predictions in the summer.

The Slater & Gordon share price remains in the doldrums, however, and ended trading today down 12% to A$2.68 following the AGM. It has been as high as A$8 earlier in the year, before the SGS acquisition and various accounting issues were identified.

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