The NSW government’s proposed ban on claims farming does not go far enough, the Insurance Council of Australia says.

In a submission on the plan, ICA says the draft bill has “limited scope” because it excludes compulsory third party and workers’ compensation.

Other areas of concerns 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 draft bill is a positive step to address the insidious practice of claim farming,” ICA says.

“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.”

Luke O’Kane, a partner at law firm Clyde & Co, says claims farming is a significant problem in personal injury cases.

“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,” he said. “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.”

Mr O’Kane says the NSW draft bill “should include specific provisions to protect survivors/claimants from being targeted by claim farmers. 

“This could involve better awareness campaigns and support for individuals who might not fully understand their rights in such situations.”

He says the wording of clause 2(2) of schedule 1 part 2 of the draft bill “essentially forgives any farmed claims that are on foot at the time the legislation is enacted, and would allow such to continue. We consider that an amendment ought to be made to clarify this section so there are more parameters in place in relation to farmed claims where consideration has been provided or received.

“Overall, while the draft bill is a positive development. Its success in tackling claim farming will depend on how comprehensively it addresses the potential gaps and whether it is implemented with strong enforcement mechanisms.”