Almost 600 claims companies have left the industry in the last year amid a Government crackdown on standards.
The number of firms who are regulated to handle compensation claims - for example for personal injuries or mis-sold financial products, including PPI - has fallen from 2,693 in April 2013 to 2,097 in March 2014, according to the Ministry of Justice (MoJ).
The fall has come as the Government introduced tough new rules to prevent bad business practices as well as increasing regulation fees. It is introducing large new fines, of potentially hundreds of thousands of pounds, for companies which break the rules.
This follows previous reforms to tackle rogue firms, including a ban on companies offering cash and other incentives to consumers to bring claims and the banning of "referral fees" which used to be paid between no-win no-fee lawyers, claims firms and others for profitable claims.
Kevin Rousell, head of watchdog the Claims Management Regulation Unit, said: "We have made it very clear to businesses that we take a zero-tolerance approach to any malpractice or attempts to take advantage of victims of crime.
"Our changes have made a clear impact, for the benefit of consumers.
"But no regulator can ever stand still and we are going further. The new fines we are introducing this year will give us the power to impose tough sanctions on those firms that flout the rules with much more precision, power and proportionality than ever before."
The regulation unit, at the MoJ, is responsible for regulating companies which handle claims on behalf of people pursuing compensation for injuries, as well as other issues such as mis-sold financial products and services.
Justice Minister Lord Faulks said: "We have made major reforms to turn the tide on compensation culture, drive down insurance premiums and help honest people.
"What we have already seen is that this has had a significant impact on the amounts people are having to pay and the departure of a large number of claims companies will be welcomed by many."