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Quindell – Industrial Deafness: Humouring a Bull but the Maths still Don’t Stack Up

By Tom Winnifrith, The Sheriff of AIM | Friday 27 June 2014

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

I am urged by various bulls to reconsider my questions on Quindell with reference to data provided by the Institute of Actuaries on Industrial deafness. I have referenced that data and it bears out my thesis 100% in that it shows that there is not a cat in hell’s chance of Quindell hitting its target of 72,000 cases a year settling at £9,000 + on average.

A bull posted on the comments thread:

I suggest you read this. Very interesting and numbers are rising and well above the 20,000 you quote. If you look back as well they were peaking at 85,000. Could we be returning to those days. Most likely given this is probably the new whiplash.

Okay Mr Bull lets go to the paper from the actuaries which you can find here – pages 44 and 45 are what to look at.

The numbers for 2012 show 55,000 claims being made.

The numbers settling at nil (i.e. losing so generating no income for firms like Quindell) are c50% - that is a consistent number over many years. So the number of actual cases where a firm could make £9,000 is 27,500.

But the bulls say what if we go back to peak years. The highest year in terms of claims was 1992-3 but how many were successful? Perhaps let’s look at the highest year in terms of settlements – that is 1995/1996 – which incidentally suggests that the idea that Rob Terry can turn his claims around in 9-12 months rather than the industry norms of 20-36 months is a little ambitious.

In the peak settlement year the number of claims settled at nil (i.e. lost) was just over 50%. Bang in line with long term trends.

Now I accept that the number of claims may be increasing rapidly. But in 2012 you would be looking at c 27,500 successful claims with total claims increasing by 20,000 in that year. If the increase was the same in 2013 and 2014 you would have 95,000 claims being made this year. Assume that 50% are nil claims ( and incidentally the anecdotal evidence is that the percentage of nil claims is increasing thanks to the ambulance chasers drumming up marginal business) then the TOTAL market for successful claims this year will be ….c47,500.

The total market will be 47,500 while Quindell as a new player will be processing 72,000 successful claims. That appears to give it a market share of c150%. I am probably missing something here - perhaps a Bulletin Board Moron might assist?

As I noted before I find this hard to understand but if this is the best that the bulls can come up with…perhaps a Bulletin Board moron or, heaven forbid, even Quindell can explain how it has justified its assumptions.

Perhaps Cenkos and Killick who have published gushing BUY notes on the back of the QLS Presentation predicting 72,000 wins a year might care to talk me through their assumptions at the same time?

Incidentally page 46 indicates an average claim size of successful claims of c£5500 – a stable number. So claimants get £5500 (minus 25% success fee to Quindell) so call that £4000 while Quindell reckons it will get just over £9,000. Hmmmmm….sounds a bit like Whiplash and we know how that all ended.

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More on QPP



  1. It just gets worse and worse .

    Any one like to buy a few containers of duff invoices ?

    only 10% of face value !

    Anyone ?

    Please ?

  2. Be careful, Tom, or the soon-to-be-formed Quindell Shareholders’ Action Group – for that, read Rob Terry “All hail the Messiah” Fan Club – will condemn you as a heretic.

  3. zeronegative

    Hi Tom,

    That board is getting weirder by the day. They’re having a 1hr no posting session as I type this in some stunt to show solidarity with Rob Terry and other shareholders – like anybody cares.

    Someone called Longtermholder, candidate for bulletin board moron of the week surely, has formed this cult, creating various lists with people’s details on it, seems to have developed a massive ego, thinking he and has little gang are going to changed the fortunes of the share price. The hatred of anyone who asks any legitimate questions is beyond a joke. To get any respect over there you have to tell LTH that he is a genius and you worship him and his follows and then come up with valuations around the £15-£40 mark. Very entertaining!

  4. I saw this report a few days ago so I have quite a few thoughts on it. It does cast doubt on QLS’ 9k figure (7k-8k of which is fees recoverable from the other side and from the client if any contributory negligence).

    The first thing is that these 55k cases are those reported by just 14 CMCs out of over a thousand at that time. No doubt these were among the largest and the vast majority are tiny ones, but there must have been more than 55k. The number is steeply rising in the chart to 2012 as CMCs are turning their focus to farming NIHL. Slide 8 here suggests the last 18 months have had double the cases of the previous 18 months, with a pre LASPO glut, which are probably still being sold and many of which QPP will have bought:

    They’ve been doing EL/PL as 20% of their caseload, presumably mostly NIHL as with rest of the industry, so they have some data to work with in their own forecasts. The costs figures do however appear to be assuming a very high success rate (!). As the report shows (p.56), cases settled in the first year are dominated by losing cases, and over time average 50%. So early on they’ll realise if they are doing worse than anticipated and probably switch back to RTA. However, even with a 50% success rate it is clearly profitable for the industry so they could still make money or shouldn’t lose too much even they undershoot their expectations by some distance.

    I anticipate they’re in for disappointment, but the sp is so low I consider that in the price. But they may do better than 50%. Here’s an interesting comparison with QPP:

    Page 13 – they studied a large PI firm focusing in NIHL and it looks like they should win 50% of their cases, and that’s with poor case selection, inexperienced staff (QPP are people with NIHL experience), poor systems, presumably not having their own clinics (slide 22 of the QLS presentation emphasises their thorough initial vetting compared ot other firms).

    An interesting quote from the report: “What is your current estimate of how many claims that are notified in a particular year finally settle at zero cost and have no allocated expenses?
    Six entities provided an estimate ranging from 4% to 70%. ” p.39

    That’s a wide range! So QPP holders should hope QLS are better than average.

    I notice in the QLS slide 25 they have 1.5k from the client. This suggests 6k damages (if these are post LASPO cases, though probably they have bought a lot of pre LASPO too). That suggests they want to push for bigger settlements which also means longer cases and fees (though may be cancelled out by more chance to fail), or picking higher value cases.

    The cost charts on the report seem to contradict what it says on p.30-31:
    “As discussed further in “Section 6 Data Collection and Trends”, settlement amounts are thought to be in the range of £12,500 to £15,000.
    The majority of claims involve mild cases where settlement amounts for damages average £2,000 to £3,000. In contrast to the relatively low cost of damages, solicitor bills average £14,000 to
    £15,000 and settle for around £9,000 to £10,000 (a 33% discount) and account for approximately 70 to 75% of the total claim costs for mild cases. For severe cases involving young defendants, severe hearing loss or tinnitus claims can reach up to £32,500”

    Answer 14 on p.40 also seems to support this (when including the client’s own negligence element of the costs)

    QLS think they’ll get 7-8k costs from insurers, so they would need a v high success rate or be targeting above average value cases. As I said I think they’ll be disappointed, but should still be profitable.

  5. Of course the real elephant in the room is not the number of claims (which is bollocks, as we all know), nor is it the success rate. It is the average per case, which is just a nonsence.

    Every so often, to justify cutting back legal aid, the Government issues a press realease saying “such and such a barrister just earned £0.5million from legal aid”. What they always omit to mention is that this includes 20% VAT, monies paid to junior counsel, and – more importantly – THAT THE FIGURES COVER A CASE WHICH LASTS MORE THAN ONE FINANCIAL YEAR!

    Why does that matter? Well, quoting a metric of “I’ll get £x per case” is pretty meaningless, unless you also give the costs involved with getting that £x.

    Now here’s another thing that follows on. When you do a portal case, you get a fixed fee. It’s rather similar to selling gym memberships. x number of punters throught the door = y amount of revenue.

    When you do a hearing loss claim, your costs are – to use the legal expression – “to be the subject of a detailed assessment if not agreed”.

    You do not get “£9,000 per case”. It just doesn’t work like that. You write down, on a schedule, all the things done by all the members of staff, and how long they took to do those things. You then multiply that time by a figure set by the Civil Justice Council according to seniority of the staff member. Quindell actually only employs something like 54 solicitors. [see]

    That means those 54 would be able to charge between £175 and £220 per hour. The rest of the staff doing Quindell’s 70,000 claims will be what is known in the trade as “Grade D”. The current hourly rate hovers around £117, but see

    Rumour has it that this is going to be reduced significantly.

    So my point is? Well you only get £9,000 on a hearing loss case if:-

    a) it is contested by the opponent to justify having done the 70 or so hours of work on the file.
    b) if you can pursuade a judge (or your opponent) that you were justified in doing 70 or so hours of work on the file.
    c) Your staff have actually spent 70 or so hours of work on the file. – At a detailed assessment, you need to have available to you evidence that you have done the work, such as copies of documents created, or notes made.

    Now, leave to one side for a moment the big issue which is that if a case were contested to that extent it is probably because the opponent thinks it is worth fighting (and therefore the chance of success is low).

    If you book £9,000 of revenue, you are going to have to have incurred an order of magnitude more costs than your avergae portal whiplash claim.

    Hearing loss will NEVER BE THE NEW WHIPLASH. It can’t be.

    Back in the day, you used to be able to charge what was known as a success fee on cases you won, which was up to 100%. That made a significant difference. You could run a whiplash to a fully contested trial. You may lose. But if you won, you got double costs, which made up for the losing cases.

    They abolished this last year. Now, if you run a case to trial and lose, you get fuck all – if you win, you just get the basic fee and whatever you can from the client (i.e. 25% of his damages, of £5,000 = £1250). It means it is uneconomic to take risks on marginal cases.

    And (thankfully I am coming to the end of this rant) the other side – the insurance company paying out – is represented by expensive lawyers who know when to cave in at the beginning (when the claimant has done no work and can’t get more than a couple of grand tops in costs), or fight it to the end.

    I think Mr Terry ought to be asking his PR people to make him some friends. Not with the City, and not with Bulletin Board Morons. But with Bubba from D wing. Bubba likes to be cleaned real good. Real good.

  6. Doom

    very interesting !

  7. Malcolm Stacey

    I’m fairly thick, but I’ve read up ‘About Us’ on Quindell’s website, and I haven’t a clue what they actually do. Can anyone enlighten me?

  8. I can tell you what they claim to do but that may be somewhat different to what they actually do :-

    They provide software and legal services to the insurance industry and the claims handling industry . Both as bespoke packages handling the whole process of insurance / claims and also as individual software solutions . More recently they claim to be getting a large portion of their income from claims handling of industrial deafness compo claims, as opposed to motor legal claims.
    The big controversy about the company is actually very simple :-They have no cash or very little for the size of the enterprise . This is principally because they book their revenue into their accounts before a job is complete. With insurance many claims fail part way through and thus revenue does not actually materialize . Hence the lack of cash and very high level of unpaid debtors shown in the accounts of the company .
    In essence :
    The bulls say that the receivables will get collected eventually.
    The bears say that a lot of the receivables will never ever be collected and will eventually have to be written off via a provision in the accounts … profits that have already been stated are grossly over stated .
    I keep wavering from bear to bull to bear depending on Toms constant revelations, but now have settled as a bear .

  9. I am a shareholder in Quindell but unlike so many I enjoy reading what TW has to say. It is true that he is not always 100% correct but at least he raises proper questions that keep RT honest. (There may be a bit of poetic licence used there). What I do not like is that TW only gives a one sided view of things. Sure some of the things he has dug up should never have happened, sure RT has previous but for any company growing at the rate of Quindell, the cash burn was always going to be very high. Until the profit stream is higher than the running costs financing will be required. Institutional Investors have a large stake in the business and are not fools. They will be aware of the peripheral shenanigans that are onging but must believe eventually there will be an upside. So TW, I applaud your investigative qualities, not so keen on your language sometimes but please try to be even handed and your following will grow.

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