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Quindell: Who is right? It or the ONS (The Government) – those industrial deafness statistics

By Tom Winnifrith | Wednesday 18 June 2014


Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


One of the reasons that Quindell (QPP) had its application for a main market listing canned by the UKLA was that its business had changed so quickly. We are still waiting for Quindell boss Rob Terry to tell us ALL the reasons for his regulatory rejection.  But the speed of change at the main “profits” generator Quindell Legal Services is breathtaking. Numbers presented to City analysts yesterday leave me utterly baffled. I am, of course, thick as two short planks - perhaps a Bulletin Board Moron might care to explain it all to me.

Back in August 2013 Quindell claimed that its average fee in QLS - which then dealt overwhelmingly with Road Traffic Accident (RTA) claims - was c£2000. The Insurance Times said that the industry average was just over £1000 but Rob Terry is a gifted man and so when he accrued income ( i.e. booked revenue yet to be invoiced but which he expected to invoice) at the higher level who were we to doubt him? KPMG has signed off on his assumptions and so I accept them all..

By early this year QLS was claiming an average fee of £3650 while elsewhere in the industry fees were falling. I covered this in detail HERE.

And so yesterday QLS held a City presentation at which it for the first time mentioned that QLS was in H1 2014 only spending 80% of its time handling RTA claims where the average fee is it admits £2,124 – twice the industry average – but was spending 20% of its time on “industrial deafness claims” where it is making nearly nine grand a pop so giving a blended average of £3,650. Shimple…so why the hell did Mr Terry not mention this before?

It gets better. Industrial deafness is the new whiplash. Claims are all handled outside The Portal so fees appear unlimited. One suspects the Government will change this. Indeed I chatted to the Association of British Insurers today and it is collating data on this issue. It was the ABI that got the whiplash bandwagon stopped (with a consequent slashing in fees that legal forms could charge) and you can bet that industrial deafness will be next.

Pro tem QLS now plans to switch its focus so that in H2 6,000 of every 15,000 claims it handles (its monthly load) will be industrial deafness so pushing average fees up to £5000 as industrial deafness claims are being booked at a revenue of just over £9,000 per case. This is a pretty dramatic change in strategy with a virtually new business now set to generate 75% of “profits” at what is the largest Quindell division. Rob kept this shift a well-kept secret did he not?

No wonder bulls were claiming that earnings forecasts of 4p per share look tame given that Quindell will be handling industrial deafness claims at an annualised rate of 72,000 a year.

Oh, Hang on Henry what was that you said?

Oh. The ONS Labour workforce survey?  The largest survey of British workers in the land says that there are 20,000 workers each year who suffer from industrial deafness. Yes you read that number correctly - see HERE.

Before folks bang on about clearing up a vast historic backlog, the rules state that you must lodge a claim wthin three years of losing your hearing so folks who went deaf any time before 2011 cannot now claim.

However, there has been a steep increase in the number of folks trying it on with the “new whiplash” encouraged by an army of ambulance chasing no win no fee lawyers. In 2013 the number was 35,000 but almost half of those folks drop out very quickly in the process when their claims are shown to be bogus. I refer you to an article on this subject HERE.

But Rob Terry is telling us the he will be handling cases at an annualised rate of 72,000 a year from H2 this year. I am really confused by this. One bull of the stock said that Rob will help to grow the market by finding new claimants. But the growth in claims in recent years has been driven largely by claimants who will make nothing for their lawyer as they are bogus and will drop out quickly. I refer you again to the ONS statistics on the actual number of REAL claimants which must surely cap the size of this market?

Maybe there is a vast untapped market out there which Quindell can move to almost monopolise, squeezing out all those ambulance chasers. It could be that ONS data based on massive workplace surveys is just wrong and hugely underestimates the problem and that Rob Terry has picked up on this. ONS Data is usually viewed as very reliable but what do I know?

I attempted to ask Quindell why it thought the Government data was so massively wrong and also if it felt that this niche market would suffer a whiplash type reversal in a few years in light of my chat with the ABI. Quindell declined to comment.

Maybe this is another question for Rob Terry at tomorrow’s AGM? Why do you think ONS data is so massively wrong?

I might also ask about the cashflow implications of going into a business area where lead times will inevitably be even longer than RTA?

I would also like to know what net cash is set to fall to as we enter Q3. The word on the street is £15 million (a fall of £125 million or c£20 million a month since Christmas). Perhaps Rob could enlighten me on that matter at the AGM as well?

Questions, questions, questions


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More on QPP


Comments

21 comments


  1. craig macfarlane

    Excitedly goes on the ONS Link – Starts Reading

    Hang on TW. What’s this I read.
    “There is no current, comprehensive source of data on work-related hearing loss.

    The preferred source indicating the prevalence of work-related deafness in the working population of Great Britain comes from a study carried out in 1997/98 by the Medical Research Council which estimated that 509 000 individuals suffer from deafness as a result of exposure to noise at work. This was calculated by an Attributable Fraction method which does not rely on individual exposures which are difficult to ascertain.

    The Labour Force survey estimates around 20 000 individuals become aware of work-related hearing loss each year.

    From the IIDB we get numbers of new claims assessed for work-related deafness which is a measure of those most severely affected. Numbers are relatively small compared to the LFS with case numbers in the hundreds each year.”

    Not quite as clear as you make it out to be. I like to read both Bull and Bear arguments but you are becoming a BB Moron yourself….. A Blogging Board Moron.

    I expect better from an investigative journalist.

  2. Tom
    I appreciate you spend much time doing the research. But you have been bashing QPP with one article almost every other day in the last two weeks, is it worth it? QPP SP is recovering, it seems that people are no longer interested in these secrets you uncover. After all, QPP news was all over the place I am sure most people already digested and priced in its problems. Or is it because your shorter friends start to feel uncomfortable getting squeezed? I note you did the same to IOF, almost one article every time an RNS was released claiming your prediction was right and gave sell advice, until it touched bottom and had a >100% bounce a few weeks ago – afraid those who took your target price of 10p and sold at hefty loss must be kicking themselves now. Why don’t you spend your precious time and knowledge to cover a broader scope? And why do you only pick on AIM shares that are volatile to sentiment and news/comments?

  3. Have a look at
    http://www.postonline.co.uk/post/analysis/2307104/industrial-deafness-the-new-whiplash

    “While insurers are not entirely in agreement, many say there is evidence that deafness claims are not accelerating at the same rate as they were before 1 April – but they are not going back to 2007 levels (when they were under 20 000) either, according to Gallimore: “They are starting to stabilise, but they are stabilising at a new reality for us. If you compare our 2012 average claims with our 2013 new claims, we’ve probably seen a 40% increase as the new norm.””

    It seems the 20,000 figure is very old news. Insurers have seen a large rise in claims. 40% rise even from 2012 to 2013. Some have called it “the new whiplash”, with the main difference that it’s far easier to detect fraudulant cases since false claimants can’t consistently reproduce the expected test results.

    Also see this for rise in what insurers are seeing:
    http://www.axaconnect.co.uk/News/2013/Is_deafness_in_the_workplace_the_new_whiplash_/

    One key thing is probably that the threshold is now 80db rather than 85db. That’s much less than half the old intensity (db is not a linear scale).

    I don’t expect this particular bandwagon to last for more than a couple of years perhaps, but who knows.

  4. Sorry Tom, could you please elaborate on why you think QPP is targeting 6,000 monthly cases of “industrial deafness claims”?

    I can see in slide 19 that QPP targets 6,600 EL/PL monthly, 6,000 on slide 26.

    Based on slides 17 and 18, it appears that EL/PL is more than just hearing loss. EL/PL is apparently “led” by hearing loss. Since EL/PL (I assume) stands for employers liability and product liability, I think this is a broad category. A good question would be about the breakdown of EL/PL.

  5. Nevermind, I found it. Nice work Tom :).

  6. ADVFN Prep

    The 6000 cases are at 9k the HL, the 600 are conventional employers liability ( you slip on a floor etc) which are much lower.

    Greg/Craig – the 20k figure is THE CURRENT LFS number for those who are actually affected. Sure there are more claims ( 35k last year) but as reported 1/2 of those fail quickly.

    If there are only 20k sufferers a year the market is capped. But perhaps ONS made that number up?

    Zach. I write becuase I am breaking news. I do not care if no-one is interested. As it happens my page views suggest they are!

    T


  7. Defender of free speech

    If you are an advocate of promoting free speech then why do you block people on twitter that challenge you in an adult fashion ?

  8. Defender of Free Speech.

    The concept of free speech explained for morons like you…

    http://www.shareprophets.advfn.com/views/5378/free-speech-explained-to-a-bulletin-board-moron

    t

  9. Tom,

    You seem to spend a lot of time knocking Quindell and rubbishing the company.

    Did Rob Terry bully you when you were a child?


  10. Defender of free speech

    The fact you moderate comments here surely goes against that too – so you’ll only allow comments / q’s here & twitter if you accept to answer – pot kettle and black things spring to mind when you acuse Rob Terry of the same thing you appear to do !!!!

  11. Defender

    Did you not read the link I put up or is it that you find long words hard?

    we moderate to block floks using these boards for advertising or posting libel etc.

    We allow folks with negative IQ’s to post complete crap as I we have demonstrated twice with regard to you within the past 10 minutes.

    Best wishes

    Tom

  12. I am genuinely gobsmacked. Does someone actually pay you to write this drivel? Since when are government statistics accurate? By their own admission: ‘Labour Force survey estimates…’ yes estimated, so in other words they don’t actually know.

    It’s another article with very little fact. In fact you still haven’t come back to the genuine questions raised about your previous articles where you claim to have evidence, but refuse to disclose it.

    Still, its good for a laugh. Good luck at the AGM. Don’t forget your copy of the bluffers guide to financial journalism.


  13. Defender of free speech

    We all folks with negative IQ’s to post complete crap ????

    Great english Tom !

    Why are you so angry all of time ?

    You call yourself a journalist however the majority see you for what you are !

    A failed fund manager & failed restauranteur.

    BW

  14. If Tom is “The Sheriff of AIM” shouldn’t we be demanding an IPC report into Police standards?

  15. Defender ……… pardon ? speak up a bit .

    In my experience Tom only ever removes posts which could result in a libel claim or are grossly abusive to another comment poster . There is a line between banter and gross personal abuse which unfortunately some find hard to grasp.
    I post a fair bit here and cant recall having a post edited or removed since the site started up . Many times my views are not aligned with Toms or other contributors and that has not resulted in any censorship of any kind.

  16. I don’t know why the LFS figure is so low compared to claims. The article I linked says at the bottom:

    “55 000+: Number of new deafness claim notifications per year in 2012 (Institute of Actuaries)”

    A 40% rise on that would be 77,000 cases in 2013. So if 50% are false claims, that’s still more than 20,000 that at least go to settlement. In 2014 presumably there is another rise in progress (who knows how much; maybe 100k claims this year, still driven by CMCs). As for the 50% failure rate:

    “Gallimore [works for an insurer] points out that the rate of rejected deafness claims is also on the rise: “We have a denial rate of 50% at the moment. It’s very high – the highest of any line I work with. Some of the claims come with very little paperwork, so they are quite easy to defeat once you start questioning them.”

    So this is after claims have been made and received by defendants (it’s unclear that ones which the CMCs dismiss after initial tests would be notified to insurers and appear in the 55,000 in 2012). The 6k per month that Quindell deal probably includes the easily defeated 50%.

    I admit though, even I would want to see Quindell asked how they would grab such a sizable share of a 2014 market in the region of 100,000 claims (and also how large they think the market is this year – I saw one law firm claim 80,000 hearing loss claims per year).

  17. Greg

    Your first AXA article used a number of 17,500 new cases per annum which tallies in with the 35,000 claims and 50% being knocked back as fraudulent.

    Can you prove the actuary link. Is a deafness claim notification the same as a legal claim?

    QPP is cliaming it will handle 36k cases in H2 2014. On your guestimate number that is a 72% market share from a virtual start up operation. Do you think that a tad bullish? And on your numbers it will earn £0 on half its cases but still face costs.

    Lets ask Rob Terry tomorrow?

    T

  18. Fair enough, it’s a good question for tomorrow. I’m no expert on this or interpreting the numbers so I’ll be interested in their answers to this and your other questions.

  19. Greg.

    Questions? Spread on number I will be allowed to ask is currently 0.5-1.3

    If forced to made a trade I’d be a seller!

    T

  20. Perhaps take a variety of fake moustaches and hats just to give yourself a fighting chance!

  21. The figure of £9,000 fee income per case = around 60 hours of a legal executive’s time. How would the average deafness case take that long? Defendants will settle these where they can because damages are low (there’s no loss of earnings) and liability is difficult to contest. I’d say generally they get would settled on receipt of the plaintiff’s medical report. Say three to five hours work by our legal exec.


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