In amongst the almost orgasmic coverage of the birth of the royal baby yesterday was a story with a significantly lower profile but which will quite possibly have a far greater impact on some of us. The response from some quarters to the news that the number of ‘ambulance-chasing firms’ has fallen by a third was, I am sure, nonetheless equally ecstatic.

Claims management companies are – we are reliably informed by lawyers, the government and the press – the scourge of the modern age. They have promoted the growth of a compensation culture, encouraging all and sundry to ‘have a go’ at getting something for nothing. They have tarnished, perhaps irrevocably, the name of personal injury lawyers and ensured anyone who does make a claim, unless they are incapacitated for life, is branded as a skiver or scrounger.

Not a great track record, although conversely pretty impressive for a type of firm so often branded as unpleasant and unnecessary. It’s a wonder they managed to get any business at all, which is where many of their opponents miss the point. They may well not all be reputable (find me a market that has no bad apples), but they have been successful because they give consumers what they want.

It may be inexplicable to some why anyone would want to pay a middleman when they don’t have to, but how many of them have ever stopped to think why consumers flock to claims management companies? Yes, the in-your-face and inducement advertising has been a factor, but probably more important is that these companies make it easy for people to make a claim. Just as vital, they let an often uninformed public know of their right to compensation in the first place.

When most lawyers were still sitting cocooned inside their dusty offices waiting for claimants to come to them (and no doubt driving them away again with bemusing legal language and opaque charging structures), claims companies were out there promoting their services at times and in places were people were receptive to the message. It’s all very well to denigrate them, but this is precisely what lawyers should have been doing.

This is not to say the sector didn’t need cleaning up, or that the claims system didn’t need reforming, but it’s important to understand precisely why these firms flourished and why banning referral fees (the main mechanism by which they generated their income) is unlikely to work.

Just because lawyers can no longer pay these fees doesn’t mean someone somewhere isn’t paying them. In a further attempt to cut the cost of claims under the Legal Aid, Sentencing and Punishment of Offenders Act which came into force in April, successful claimants will now have to pay a ‘success fee’ to their own lawyer – rather than the losing side in a case which was previously the case. While this has been capped at a quarter of the amount of compensation they are awarded it is still, effectively, penalises injured people.

This is neither the time nor the place to go back over all of the reforms made to the claims system, not least because it is all so complicated only a handful of people outside the industry properly understand it. However, I would suggest that the collective pat on the back ministers and many in the industry are giving themselves at the apparent demise of ambulance chasing firms is premature.

The closure of claims companies does not in any way prove the reforms overall have been successful. A far better measure would be a significant and sustained reduction in car insurance premiums. Insurers have consistently argued these have become extortionate (my word) because of the amount they have to pay out in inflated legal costs and for fraudulent accident claims.

I suspect, although I am a hardened cynic when it comes to the insurance industry, that any reduction, if visible at all, will not be as significant as the government is clearly hoping and expecting. Even more important, although harder to measure, will be ensuring that no injured person with a legitimate claim is denied their right to compensation. I fail to see how simply reducing the number of claims companies does much for either.

To be fair, lawyers, through the Law Society, is trying to fight back. Their latest ad campaign promoting solicitors (‘Don’t get mugged by an insurer – use a solicitor’ accompanied by an unintentionally (I assume) comical a picture of an accident victim has come under fire from the Association of British Insurers (ABI) for being a ‘gross error of judgement’ and ‘little more than public name calling’ -see HERE.

Much as it pains me to admit it, the ABI is right. The adverts are tacky and throwing insults around is never edifying, it simply ensures lawyers occupy the same moral ‘low ground’ as the insurers. Paradoxically it also makes lawyers look a lot like the claims companies they denounce so readily, which means, I suppose, they could be on to a winner.

Whichever way you look at it, it is hard not to conclude that rather than being the centre of the claims process and the reforms pushed by the insurers into the open arms of the government, consumers are probably the last thing on anyone’s mind.