Claim farmers and disasters

What are claim farmers and claims management services

After a natural disaster, there may be a rise in firms approaching flood-affected people with offers to help with their insurance claim.

These firms are sometimes called ‘claims management services’ or ‘claims farmers’.

These firms act as a go-between on behalf of a person or business and their insurance company, representing them for a fee and offering help with their insurance claim.

They sometimes entice you to use their services by:

• saying they can guarantee your claim will be paid
• advising a cash settlement figure you may receive
• promising your claim will go to the front of the queue
• giving a free inspection.

They may:

• charge a percentage of any cash settlement offered by an insurance company
• contact people by phone, social media and in person
• give the impression they are from the government or acting on a law firm’s behalf.

Advice for flood-affected people and businesses

You should deal directly with your insurer if impacted by a natural disaster – you do not need to use a third party to help with your insurance claim.

You should understand the risks of signing up to a claims management service or a claim farmer.

Do not sign anything preventing you from dealing directly with your insurer, broker, financial adviser or your own lawyer.

Risks for flood-affected people and businesses

The claims management service will usually seek a cash settlement as the resolution. This could mean:

• You will lose the option for your insurer to arrange the repairs which can sometimes be a complicated process. Insurers also offer guarantees – sometimes for life – on the work they do.
• You may be left out of pocket in situations where the repair costs are uncertain.
• You may have to pay the firm directly if your insurance company does not pay the claim.
• The firm may unreasonably inflate your claim to increase their own fee. This means some firms may drag the claim out for a long time arguing for an unrealistic amount.

The arrangement between a person and a claims management service or claim farmer is a civil contract.

This means that if you have any problems with the firm, you will need to engage a lawyer and possibly go to court to resolve it.

The following agencies may be able to help but it is definitely better to avoid getting into a situation where you need their help:

• Australian Securities and Investments Commission (ASIC)
• Australian Competition and Consumer Commissioner (ACCC)
• Office of Fair Trading (OFT)
• Australian Financial Complaints Authority (AFCA).

More information

The Australian Government is responsible for insurance regulation, and the laws are administered by Australian Security and Investments Commission (ASIC).

Contact ASIC if you are concerned about the conduct of a claim management service or claim farmer.

If you don’t have your insurance documents or if you can’t remember who your insurer is, you can contact the Insurance Council of Australia for help.