NSW targets claim farming in new draft bill

Unsolicited contact and referral sales face bans under the proposed legislation

NSW targets claim farming in new draft bill

Insurance News

By

The New South Wales government is moving to crack down on claim farming, a practice where third parties solicit individuals to lodge compensation claims, often without their consent.

A draft bill introduced for public consultation seeks to prohibit the unsolicited contact of potential claimants and the buying or selling of claim referrals, with penalties reaching up to $55,000 for offenders.

According to Colin Biggers & Paisley, claim farming is particularly concerning in cases involving historic child abuse, where survivors may be retraumatised or financially exploited.

“The introduction of the Claim Farming Practices Prohibition Bill 2025 (NSW) signals a concerted effort to tackle these unethical practices. With public consultation open until 7 February 2025, institutions and insurers have an opportunity to influence how this legislation is shaped,” Colin Biggers & Paisley said.

Under the proposed law, it would be an offence for third parties to approach individuals about making claims unless they have an existing legal relationship or are referred through recognised community legal services.

The bill would also ban law firms from paying for client referrals, including through intermediaries who prepare evidentiary statements for a fee. Offending lawyers or firms could face disciplinary action, be barred from recovering legal costs, and may be required to refund fees already collected.

A two-year limitation period for enforcement is proposed, recognising that claim farming is often only discovered once claimants receive billing statements detailing disbursements for referral fees.

Colin Biggers & Paisley noted that similar laws have already been introduced in Queensland, South Australia, and Western Australia, targeting personal injury and motor vehicle claims. In Queensland, penalties for claim farming reach $48,390, while South Australia’s new laws impose fines of up to $50,000.

“The NSW Bill draws from these frameworks, aligning its scope with claims under the Civil Liability Act 2002 (NSW) and intentional tort claims, such as sexual assault. Importantly, the Bill seeks to preserve legitimate legal practices while curbing predatory behaviour,” Colin Biggers & Paisley said.

According to the NSW Department of Communities and Justice’s report, claim farming has placed a financial burden on claimants and insurers. For example, intermediaries can charge between $800 and $10,000 per claim referral, with referrers receiving $50 to $100 per lead.

“These fees are often embedded in legal disbursements, shifting the cost burden onto claimants and increasing expenses for insurers. The practice also introduces significant risks of fraudulent or inflated claims, complicating the assessment of legitimate cases and adding strain to already resource-intensive claims management processes,” Colin Biggers & Paisley said.

Public consultation on the draft bill is open until 5pm on Feb. 7.

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!