The Claim Farming Practices Prohibition Act 2025

New South Wales has implemented decisive reforms targeting claim farming, signalling a renewed commitment to integrity and accountability.

In around February 2025, New South Wales (NSW) introduced the Claim Farming Practices Prohibition Bill. This Bill has now been enacted in legislation as the Claim Farming Practices Prohibition Act 2025 (the Act). This is a significant development in the legal landscape of, marking a decisive step in the State’s efforts to curtail claim farming, a practice widely viewed as exploitative and harmful to vulnerable individuals seeking justice through compensation claims.

Under the new legislation, it is now a criminal offence in NSW to solicit, purchase, or sell personal injury claims arising under section 11 of the Civil Liability Act 2002 (NSW). This includes claims related to serious injury, medical negligence, public and product liability, and intentional torts. 

What is Claim Farming?

Claim farming refers to the practice whereby typically third parties actively seek out individuals who may have potential compensation claims – often through cold calling, online ads, or referral networks – and then sell this claim information to legal firms for a fee. In some instances, law firms are also contacting individuals directly. 

These operations, often lacking transparency, are known to pressure or mislead individuals into initiating claims they did not fully understand their rights such as victims of injury or abuse, already in a vulnerable state, being subjected to further distress through aggressive solicitation, misinformation about their rights, and, in some cases, manipulation into filing illegitimate or exaggerated claims.

Aims of the Act

The Act aims to deter unethical legal practices and protect vulnerable individuals. Attorney General Michael Daley stated that the Act aims to "put a stop to the insidious practice of claim farming that exploits the trauma of vulnerable people". 

Beyond ending exploitative conduct, the legislation also targets the reduction of fraudulent and opportunistic claims that burden the civil justice system and inflate costs for insurers.

With this enactment, NSW aligns itself with jurisdictions such as Queensland, which implemented similar restrictions back in 2022. 

Consequences and Enforcement

Under the Act, legal practitioners and others found guilty of farming offences are subject to criminal prosecution including financial penalties of up to 500 penalty units (currently, $55,000).

Additionally, offending lawyers may be barred from charging or retaining any fees connected with farmed claims, with a requirement to refund amounts already collected.

They may also be found to have engaged in unsatisfactory professional conduct or professional misconduct as under section 165B of the Legal Profession Uniform Law Application Act.  

In serious cases, such conduct may constitute dishonestly obtaining financial advantage by deception, which is punishable by up to 10 years’ imprisonment under existing criminal law.

Broader Impact on Legal and Insurance Sectors

The Act is expected to deliver several positive outcomes. By reducing the number of illegitimate or exaggerated claims, it should lower overall payouts and administrative burdens. This streamlining of claims assessment and resolution will likely, in turn, lead to reduced legal and investigation costs and support more efficient processing of genuine claims.

Furthermore, the curtailment of claim farming activity could contribute to stabilising or even reducing insurance premiums, particularly in the compulsory third party and workers’ compensation sectors, where insurers have long contended with inflated claim costs due to farming activity.

We also anticipate that insurers will begin to or resume offering coverage in areas such as abuse claims, where many had previously limited or withdrawn cover due to the overwhelming volume of claims being brought.

The Act represents a meaningful reform for NSW, protecting claimants, upholding the integrity of the compensation process, and aligning the State’s approach with aspiring national standards. 

Importantly, the Act preserves access to justice for genuine claimants. Individuals remain free to seek legal advice or support from others when initiating a claim. The prohibition specifically targets the commercial trading of claims, not genuine legal assistance or advocacy.