The insurer also wants bogus claimants to face criminal penalties under a shake-up of Commonwealth work safety laws, and one large government department wants tougher standards of proof for public servants claiming to have been psychologically injured by workplace bullying.

In its submission to the official review of the Safety, Rehabilitation and Compensation Act, Comcare says its investigators must rely on the general Commonwealth fraud legislation to detect and deter scams against the scheme.

But the insurer has suggested specific offences of making omissions or deliberately misleading the scheme be written into the Act which is currently under review by former Defence Department secretary Allan Hawke and senior barrister Peter Hanks QC.

In its submission to the review, Comcare argues for tougher powers to detect and punish bogus, exaggerated or fraudulent claims.

“Comcare recommends amendments are made to the SRC Act to specifically define particular actions or the absence of actions in certain circumstances as constituting offences under the Criminal Code,” the insurer wrote in its submission.

“An example would be an employee failing to provide Comcare with information of a change in circumstances.

“Comcare considers legislative authority for information gathering powers for authorised fraud investigators including production notices and ability to execute search warrants etc, be considered.”

The Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) says that it is too easy for bureaucrats to get compensation for 'psychological injury' under the Act, and that reforms introduced in 2007 have been counter-productive.

“The acceptance of claims based on the perception of harm, and in the consideration of the weight of evidence, disproportionately favours the acceptance of liability,” FaHCSIA wrote in its submission.

The department says too much weight is being placed on the medical evidence, which is often based solely on the word of the claimant.

FaHCSIA wants a higher “common law” standard of proof for claims of psychological injuries in the workplace.

The Australian Psychological Society (APS) in its submission argues for alternative dispute resolution methods, saying that workers often had no choice but to seek medical and legal solutions to workplace conflicts.

“The APS is concerned about the increased incidence of “bullying” and “harassment” claims,” the APS wrote.

“Such increases can be explained by increased awareness of bullying and harassment, or, the 'medicalisation' of interpersonal conflict, or both.

“In the case of interpersonal conflicts manifesting as bullying claims, administrative actions may not be appropriate or a fair course of action.”

The controversy over the bitterly-contested definition of “reasonable administrative action” in allegations of bullying and harassment will also come under scrutiny in the review with several cases before the Federal Court hanging on legal arguments over the concept.

In the wake of a landmark decision by the court in March in the case of a West Australian bank manager who tried to commit suicide in the wake of a “humiliating” conference call, most employers who made submissions want the definition broadened and unions and lawyers arguing the concept should remain narrowly defined.

The review is due to report in February 2013.