HomeFinanceInsuranceInsurance claim farming: what is it and how can you avoid it?

Insurance claim farming: what is it and how can you avoid it?

Most Australians, even the older ones like me, are getting pretty good at spotting a scam. The dodgy use of English in an email or a misspelt word can often arouse our suspicions. But there’s more than one way to skin a cat, as the old saying goes.

One group of savvy-but-unethical Australian businesses is using highly dubious insurance claim tactics to squeeze money out of unsuspecting customers. A practice known as ‘claim farming’.

To describe claim farming as a scam might be somewhat dubious in itself because debate surrounds its legality. Can a practice in which a law is not technically be broken be labelled a scam? The Australian Competition and Consumer (ACCC) believes so. Its website states: “A scam is a way of tricking people into handing over money or personal details.”

So let’s take a look at the practice in question, claim farming. It is perhaps best illustrated by a genuine case reported last week by the ABC. The case involved a Perth woman, Annette, attempting to make a claim after her car was scratched by another vehicle.

Annette did what many of us would do. She looked up the number of her insurer – in this case Budget Direct – on the internet. This led her to a website, which she believed to be Budget Direct’s, and called the number displayed.

Annette even made the effort to confirm she had called Budget Direct and was told she had “called the right place”. In fact, though, she had called a third party insurance broker who advised her they would happily deal with her claim.

So far, so good for Annette. But not all was as it seemed.

Claim farming 101

Annette’s helpful phone assistant offered to look after all aspects of the claim. This included sending out a tow truck and a hire car that day. This may have been what aroused Annette’s suspicions, given the car only had scratches and was still driveable.

Nevertheless, Annette happily accepted the offer. But once the car had been towed, her nagging doubts were found to be justified. She located Budget Direct’s genuine phone number and called to discover her first phone call had not been to Budget Direct at all.

Fortunately for Annette, the real Budget Direct took over the management of her claim. This did, however, involve her insurer paying $6,800 for the car’s return, still with its scratches.

Shades of grey

Was what the claim farming did legal? That’s somewhat of a $64,000 question, or more accurately a $6800 question in Annette’s case. The Insurance Council of Australia’s (ICA) CEO Andrew Hall referred to practice as “highly problematic”.

Speaking on ABC Radio, Mr Hall said, “It seems that it’s not illegal until it gets tested. There is a grey area of law here.” Mr Hall believes the matter needs to be dealt with by none other than the ACCC.

“It’s misleading conduct, and it’s misleading consumers like Annette to think that she was dealing with her insurer,” he said. “In fact she was dealing with a third party, and they were heaping unnecessary charges on her.”

Unnecessary certainly. Illegal? The jury is out on that question. In fact a jury has yet to be empanelled. When that might happen is another unanswered question.

Budget Direct has issued a ‘cease and desist’ notice to the claim farming company involved demanding removal of its logo. As of last week, that had not happened. In any case, the Budget Direct’s logo was only one of nine it was using to lure claimants in.

YourLifeChoices has contacted the ICA asking if it has formally approached the ACCC with its concerns. For now, if you are looking to make a claim, it’s worth being cautious if you’re using the internet to track down your insurer’s contact details.

Taking action against claim farming

If possible, use the contact details on your official insurance documents or correspondence. If using an online search facility, check the address (URL) of the website you’ve reached. Make sure spelling is correct and it contains the insurer’s full name.

Nearly all legitimate insurers will use the address format ‘InsurerName.com’ or ‘InsurerName.com.au’. If you see an address that looks different, check very carefully before proceeding with your claim.

Have you been the victim of claim farming? Did it cost you? Let us know via the comments section below.

Also read: Why car insurance costs are going through the roof

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Andrew Gigacz
Andrew Gigaczhttps://www.patreon.com/AndrewGigacz
Andrew has developed knowledge of the retirement landscape, including retirement income and government entitlements, as well as issues affecting older Australians moving into or living in retirement. He's an accomplished writer with a passion for health and human stories.


  1. The initial problem here is the phone number she found online. When you do a Google search don’t just pick the first thing you see, go down the page a little if need be and find the website for the actual business you want to call.

    My first step would have been to get out the policy document, the phone number is there…….and surely she had that as the policy number would have been required to make the claim.

  2. She is with Budget Direct, it took me less than 2 minutes to get to the Budget Direct website URL via Google, and to retrieve their phone number, a 1300 number, from their “Contact Us” tab.
    Me, I have ALL my Insurance Policies stored in a labelled folder in one of my filing cabinets, and I also have the Info backed up on my computer and it’s backup.
    I only use a small number of Insurers, therefore keeping and storing that information is not hard and their details are always on hand.

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