Claim farming, also known as claims harvesting, involves third parties contacting potential claimants without consent to encourage them to bring compensation claims. This practice is particularly troubling in cases of historic child abuse, where survivors may be retraumatised and financially exploited. The introduction of the draft Claim Farming Practices Prohibition Bill 2025 (NSW) (Draft Bill) 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.

The Draft Bill aims to prohibit two practices in New South Wales:

1. Unsolicited Contact: It will be an offence to approach potential claimants without consent to solicit claims or offer referrals. This includes direct contact via phone, email, or in person, except under specific exemptions such as prior legal relationships or referrals through community legal services.

2. Referral Fees: Buying or selling claim referrals, including passing on claimant details for a fee, will be prohibited. The Bill addresses not only direct referrals but also services like intermediary-prepared evidentiary statements sold to law firms.

Proposed penalties include fines of up to 500 penalty units (equivalent to $55,000) and disciplinary consequences for lawyers. Convicted lawyers or law practices will lose the right to recover legal costs tied to non-compliant claims and must refund fees already collected. The amount is intended to be proportionate to the objective severity of the offences. This is reinforced by proposed amendments to the Legal Profession Uniform Law Application Act 2014, which allow the NSW Legal Services Commissioner to investigate misconduct and enforce penalties beyond criminal sanctions.

There is a limitation period proposed of two years from the date of the alleged offending conduct. This recognises that offending conduct may not be discoverable until after a claim has concluded and, for example, a claimant has received a bill of costs containing a disbursement for payment of a claim referral. 

Queensland implemented anti-claim farming laws under the Personal Injuries Proceedings and Other Legislation Amendment Act 2022. These reforms effectively targeted practices in personal injury claims, including motor accidents and workers’ compensation carrying penalties of up to 300 units (currently $48,390). 

In September 2024 South Australia introduced the Statutes Amendment (Claim Farming) Bill 2024 to prohibit claim farming in personal injury claims with penalties up to $50,000. 

In November 2023 Western Australia introduced the Insurance Legislation Amendment (Motor Vehicle Claims Harvesting) Bill 2023 prohibiting claim farming specifically in relation to motor vehicle claims, however this bill reportedly lapsed on 17 December 2024. 

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.

The NSW Department of Communities and Justice's Background Paper: Draft Claim Farming Practices Prohibition Bill 2025 provides detailed insights into the financial and operational challenges posed by claim farming, particularly in historic child abuse cases. Stakeholders report that intermediaries can charge between $800 and $10,000 for claim referrals, 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. 

The public consultation period for the Draft Bill closes at 5.00pm on Friday 7 February 2025. This marks a vital opportunity for institutions, insurers and the general public to share feedback and influence the final legislation. This is a chance to raise industry-specific concerns, such as the effects of inflated or fraudulent claims, and help ensure they are addressed to drive meaningful change.