Call for Stricter Regulations in NSW Claims Farming Ban

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The draft outlines enforcement strategies but raises concerns with its two-year limitation period for prosecutions and ambiguous language surrounding claims farming practices. While the ICA acknowledges the draft bill as a progressive move to curb claims farming, it emphasizes the exclusion of CTP and workers' compensation may reduce its efficacy in addressing the activities of those who engage in such practices.

Luke O’Kane, a partner at law firm Clyde & Co, highlights the adverse effects claims farming has on the insurance sector, particularly in personal injury cases. He indicates that insurers must deal with inflated or fraudulent claims, which escalate operational costs. These costs are often transferred to policyholders through increased premiums, placing an unfair financial burden on those uninvolved in claims farming activities.

Beyond financial impacts, insurers grapple with potential reputational damage and regulatory scrutiny if they do not effectively mitigate claims farming practices, further complicating their operational landscape.

O’Kane suggests the NSW proposal could be fortified by incorporating specific protective provisions for survivors or claimants targeted by claims farmers. This might include public awareness initiatives and support systems to assist individuals in understanding their rights when approached by claims farmers.

He further criticises the language of the draft's clause 2(2) of schedule 1 part 2, which seemingly allows existing farmed claims active at the time of the bill's passage to continue under the new law. O'Kane advocates for amendments to set clearer constraints around farmed claims, ensuring that any exchanged considerations are fully addressed in the legislation.

The success of the proposed draft bill in deterring claims farming will hinge on how effectively it addresses existing loopholes and implements robust enforcement mechanisms. The ICA’s urging for a more inclusive approach and stronger regulations reflects the necessity for comprehensive legislation to tackle the pervasive issue of claims farming in the insurance sector.

Published:Wednesday, 26th Feb 2025
Source: Paige Estritori

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