In a landmark moment, Australia has recorded its first prosecution for insidious scamming known as ‘claim farming’.
Claim farming or car crash scamming involves receiving cold calls or social media messages about being in a car crash and making a personal injury claim. Scammers often use threatening tactics to gather personal data from Queenslanders which they sell to personal injury firms.
In December 2019, the Motor Accident Insurance Commission (MAIC) introduced legislative reform to the Motor Accident Insurance Act 1994 (Qld) to ban the farming of compulsory third party (CTP) insurance claims.
Prior to the legislative reform, over 1.5 million Queenslanders had been contacted by claim farmers who used threatening tactics to obtain personal information and sell it for a profit. His Honour Magistrate Saggers described the intent behind legislative reform to prohibit claim farming:
The offences under section 74 of the Act were created for a specific reason, and that was to preserve the integrity of the scheme and to protect the personal information and privacy of members of the community. The conduct which breaches section 74(2) …. is illegal because it seeks to target and exploit the personal information of people who may be involved in an accident, and induces them into seeking to make claims against the scheme.
Since the legislative reform in 2019, MAIC has closely monitored and investigated reports of claim farming. Recently, they took decisive action against Accident Management Solutions (AMS) to protect Queenslanders from aggressive tactics and breaches of privacy.
On 7 February 2023, the Brisbane Magistrates Court sentenced AMS to fines totalling $1 million for 94 claim farming offences, and $5,000 for the offence of contravening an information requirement. His Honour Magistrate Saggers said:
It is an offence in which the community in my view has an interest because all of us who register motor vehicles of course pay compulsory third-party insurance – that the community acting through the Court denounces this sort of behaviour in which the offender was involved.
Each of us is undermined by conduct that undermines the integrity of that scheme, one, by using personal information of people as a commodity and compromising public perception of the operation of the scheme, and two is what I would see as encouraged exploitation of the scheme in an opportunistic way, which can do nothing other than weaken the scheme…
[I]t is so important that the community has confidence in this particular scheme. It is a vital scheme and it provides a vital service and whenever there is a pot of money funded by the community there is always the risk of it being exploited and hence, in my view, the penalty needs to be one that deters that.
The sentence was the first for claim farming-related offending in Australia. His Honour thoroughly considered how to quantify financial penalties for such conduct, noting:
Companies in the industry and individuals within it and within our own profession must be dissuaded from embarking in these type of arrangements and risking investigation or prosecution. This deterrent serves the interests of the community. It preserves, most importantly in my view, public confidence and integrity of the scheme. As soon as any scheme reliant on public monies or the public purse is rorted then the public confidence in that quickly dissipates and then of course understandably certain views as to its integrity are formed. There must be protection of the privacy of individuals and I do place significant weight on general deterrence in my sentencing discretion.
It was serious offending. It was planned. It was cynical, and there were significant sums of money involved. Not only did AMS stand to gain considerably through their illegal use of marketing methods to collect and sell personal information, but they did gain considerably through that. They then committed an offence in failing to comply with the investigation into the activities and in my view their response in the period of January, February and March, forming the basis of charge 95, is reflective of their behaviour throughout.
AMS entered liquidation after the commencement of the prosecution. MAIC elected to continue the prosecution against AMS for a number of reasons, including to promote awareness about the unlawfulness of claim farming and make clear to the CTP industry and the public that claim farming practices must not be tolerated.
Whilst MAIC acknowledges the low likelihood of the fines being paid, the decision of the court is important because it sends a message that MAIC is committed to eradicating claim farming from Queensland’s CTP insurance scheme.
Members of the legal profession should be wary about being approached with offers to generate personal injury ‘client leads’ (and similar). In MAIC’s experience, individuals involved in claim farming regularly create new entities through which they then reach out to legal practitioners. Frequently, such entities make flimsy promises that their lead generation arrangement is ‘100% compliant’.
Therefore, practitioners need to be very cautious if contacted about motor vehicle injury business development opportunities – even where the entity is new and unfamiliar, and/or assurances regarding compliance are given.
If you suspect claim farming, report it to MAIC. MAIC closely monitors and investigates reports of claim farming to protect Queenslanders from claim farmers’ aggressive tactics and breaches of privacy.
MAIC has been investigating complaints against numerous entities (including outside of Queensland) and currently has other proceedings in progress for alleged claim farming offending.
Further, in June 2022, the Personal Injuries Proceedings Act 2022, and the Workers’ Compensation and Rehabilitation Act 2003 were amended to mirror claim farming provisions in the MAI Act, to prohibit claim farming in each of these Queensland-based personal injury schemes.
MAIC’s first successful prosecution is an important step in ongoing enforcement. MAIC continues to work tirelessly to deter claim farming and preserve the integrity of Queensland’s CTP insurance scheme.