Direct Line Job Losses: Connected to Coalition legislation?

Direct Line workers in Liverpool: Echo photo

500 people lost their jobs at Direct Line’s Thornaby call centre this week, along with 700 at two other sites. And earlier this week the firm announced a further 500 job losses in Liverpool together with 1500 in Leeds, London and elsewhere.

We know the firm isn’t in the red - it recently revealed £94.3 million profits for the first three months of 2013 - up 47% on a year earlier so what is the explanation for these cuts described by Unite the Union as “savage”?

One possible part of the answer is that these job losses may have been impacted by recent Conservative Liberal Democrat legislation.

The Legal Aid Bill passed earlier this year was heavily criticised for the disastrous effects it will have on the ability of people to take cases to court, and on the ongoing work of the CAB and other advisory organisations. But there was another item included in the bill which has gone largely unremarked.

A couple of years ago the Coalition brought in legislation to limit the fee earned by lawyers to £1600 per case for accident injury claims on behalf of their clients where the damages did not exceed £25,000.

This saw a review of business cases for many small law firms and a general tightening up of the Claims industry. However in April the fees were furthered limited to £500 through the Legal Aid Bill.

If you have had an accident and are seeking compensation, you will now only be able to make a claim, where the damages are not expected to top £25,000 if you can find a lawyer prepared to take your case on for a fee not exceeding £500.

And good luck with that! The simple fact is that even a pretty desultory attempt at seeking damages on your behalf is likely to cost any firm more than £500 to process so the bottom has completely fallen out of the injury claims market over night.

An end to ambulance chasing? That is a good thing surely?

Indeed it sounds like a great headline doesn’t it, but let’s examine two potential consequences.

Firstly the effect on the injured: If you were in a car crash, broke both legs and were laid up for 6 months your claim might well come in at £25k – but you will now struggle to find anyone to take your case on for you. If you had a bad back as a result and were off work for 6 weeks you might have been able to claim for £1500 of damages -  but you probably wont be able to now unless you can take the case yourself. Some people simply aren’t that confident.  

So – legitimate claimants will now suffer as the Government’s attempts to tackle bogus whiplash claims has backfired.

The other consequence of this badly thought through legislation is that because the injury claims market has dried up, so too have the number of claims being made. They simply aren’t coming forward.

And it has been put to me that Direct Line – the UKs largest Insurance Company, may have found itself handling fewer claims.

Could that be a part of the reason for the thousands of job losses – and will other insurance companies find themselves in the same boat?

EDIT: Direct Line staff tell me that the Liverpool office has never been busier although definitely not with injury claims. Obviously my original source has only got half of the story so I have toned this piece down from its original assertions.  Whatever the explanation, it is a puzzling tragedy that thousands of people have lost their jobs in a profitable company. And I remain concerned about the impact of the legislation on legitimate victims of accidents.