Claim Farming Practices Prohibition Bill 2025

‘Claim Farming’ which is also known as claims harvesting, involves third parties contacting possible claimants without their wilful consent and encouraging them to bring compensation claims to then on sell the claim to a law firm.

Such practices often involve claims being sold to law firms for a “referral fee” of approximately $800 to $1,000 per claim and the intermediary “claims management service” may pay individual referrers $50 to $100 for every potential new claimant. These fees are often included in legal disbursements, shifting the financial burden onto claimants and increasing expenses for insurers to respond and engage in the claims management process.

Claim farming also increases the possibility for fraudulent and illegitimate claims. This poses risks to actual claimants by compromising the integrity of legitimate claims.

Such practices are especially troubling and prevalent in historical child abuse cases as survivors are often in vulnerable situations and more susceptible to exploitation.

The effects, and conduct, of claim farming have recently been laid bare following the arrest of a 55-year-old Sydney man who is alleged to have been the “syndicate head” of a group that allegedly encouraged and coached former prison inmates, young offenders and school students to file fraudulent claims for historical sexual abuse. The investigators allege that each “coacher” received up to $2,200 for each referral and the fraudulent claims were paid a portion of $1.3 billion from the sexual abuse compensation scheme.

The Bill

The draft Claim Farming Practices Prohibition Bill 2025 (NSW) (‘Draft Bill’) proposes to counter these unethical practices in New South Wales by: 

• prohibiting a person from contacting another to encourage them to make a relevant claim;
• prohibiting a person from buying or selling a relevant claim referral; and
• preventing lawyers who are convicted of these offences from charging legal costs in relation to the claim, and to require them to refund any costs already charged.

The proposed penalties include fines of up to 500 penalty units (i.e., $55,000) and disciplinary consequences for lawyers.

Further, convicted legal practitioners or law practices will subsequently lose the right to recover legal costs which are connected to non-compliant or unlawful claims and they must refund fees previously collected in relation to the claim.

Importantly, there is a clear limitation period that is suggested of two years from the date of the alleged offending conduct. This acknowledges that offending conduct may not be discoverable until after the claim has concluded.

Implications

Whilst claim farming predominantly impacts survivors and claimants, there are also significant adverse impacts on insurers and policyholders.

For insurers, claim farming leads to increased operational costs as they must dedicate additional resources to investigate fraudulent or inflated claims, ultimately raising the risk of financial loss. These higher costs are often passed on to policyholders in the form of increased premiums, which unfairly burden those who are not involved in claim farming.

Additionally, insurers face reputational damage and regulatory scrutiny if they fail to adequately address or prevent such practices, further complicating their business operations.

While the primary focus must remain on protecting survivors from exploitation, it is clear that claim farming creates a cycle of increased costs and inefficiencies for all parties involved. Thus, the importance of the Draft Bill, which intends to work side by side to the existing pathways to justice for survivors and claimants.