Three-quarters of the UK's 'no win no fee' accident claims firms could soon close their doors, a report from market analysts Datamonitor has predicted.
The reason is the government's new Compensation Bill, which requires claims firms to be authorised.
Datamonitor said the authorisation costs could force up to 300 of the UK's 400 claims firms to leave the market.
Claims firms will also face competition from supermarkets and motoring groups able to offer cheap legal services.
Nevertheless, Datamonitor predicted that personal injury compensation claims will rise steadily over the next few years, topping £7.5bn a year by 2009/2010.
The government's Compensation Bill is set to be introduced later this year.
Under the bill, anyone providing unauthorised claims management services will be committing an offence and could get up to two years' imprisonment.
Those providing claims management services will be required to give consumers clear advice about the validity of their claim, options for funding the costs and to provide a complaints mechanism if things go wrong.
When the Compensation Bill was drawn up in 2005, Lord Falconer, the Lord Chancellor, pledged to "put the brakes on the cowboy claims companies who take advantage of the public".