Insurers have warned of gaps in the NSW government’s proposed ban on claims farming, saying the “limited scope” of the draft bill will restrict the crackdown’s effectiveness.

The Insurance Council of Australia has raised concern over the exclusion of compulsory third party and workers’ compensation from the legal framework, which aims to protect personal injury claimants including sexual abuse survivors.

“The draft bill is a positive step to address the insidious practice of claim farming,” ICA says in a submission on the legislation. “However, we are concerned the limited scope of the draft bill, in particular the exclusion of CTP and workers’ compensation from its application, will limit its effectiveness in addressing claim farming and the behaviours of groups that engage in it.”

ICA says the state’s CTP insurers are “very concerned” the exclusion will lead to groups involved in claims farming and bad billing practices turning their attention to the motor compensation scheme.

The exclusion would lead to “increased provider networks seeking to take advantage of the scheme, resulting in increased claims (including potentially unmeritorious claims) and higher premiums for motorists”, it warns.

ICA says the bill should be expanded to include CTP and workers’ compensation.

Its other areas of concern include proposed enforcement measures, the two-year limitation period for prosecutions and the wording of exceptions around the way claims farming operates in practice.

The submission cites Queensland’s ban on claims farming as effective, noting it covers CTP and workers’ compensation and has no time limitation on prosecutions.

“Personal injury and abuse claims often take years to surface, and it may take even longer for regulators to detect, investigate and gather enough evidence to prosecute patterns of wrongdoing,” the Insurance Council says.

“We commend [NSW’s] efforts to address claim farming through the draft bill. Aligning with proven measures in Queensland, particularly around the application to CTP and workers’ compensation … and broader enforcement provisions would strengthen the draft bill’s impact.”

State insurer icare has also made a submission. It urges the Department of Communities and Justice to consider extending the limitation period to at least four years for claims farming related to sexual abuse cases.

icare says this would give survivors “the time needed to understand their circumstances and take appropriate action, while also navigating the intricate web of involved parties, including legal and/or other providers.

“On average, it is icare’s experience that these claims take longer than two years to resolve. The proposed limitation period of two years is unlikely to capture offending conduct for matters that run over the proposed limitation period.

“This is because claim farming activities related to referral payments are unlikely to be detected near the conclusion of a case.”

Consultation on the draft Claim Farming Practices Prohibition Bill 2025 closed this month. See the submissions here.

From the latest Insurance News magazine: 'Storm-chasing' claims middlemen have moved into the property space, and insurers aren't happy