A non-government, community-based organisation, Brotherhood of St Laurence (BSL), is looking at ways the not-for-profit (NFP) sector can help boost insurance coverage for those with low incomes.
“Without the need to return shareholder dividends, not-for-profit insurance could deliver products at a lower price than a for-profit entity, particularly if reinsurance does not feature as an input cost,” said Mr Tony Robinson, BSL Financial Inclusion Manager, who wrote a discussion paper tiled “Uninsured Australia: the case for not-for-profit insurance”.
Mr Robinson said that those least able to replace possessions or absorb a loss are also the least likely to be insured, and a higher rate of coverage among low-income Australians would reduce hardship when assets are damaged or lost.
He said most people who don’t have insurance say it’s because they can’t afford it, with 69% in one survey giving that as the main reason. 67% of Australian renters have no insurance, and 29% of households in general don’t have it.
“Further, between 10% and 15% of Australian drivers have no property damage coverage, and many low-income drivers experience significant financial loss when sued,” he added.
He says a dedicated not-for-profit insurance platform might be, in certain circumstances and for some products, a suitable means of maintaining lower priced products for those who need them most.
BSL believes that a NFP insurance approach could be useful in tackling two significant insurance coverage shortfalls in Australia today.
The first of these is contents insurance. While building insurance is regularly cited in discussions about the role and value of insurance, contents insurance is a protection that most low-income Australians can more easily relate to as it is not dependent on home ownership. Furthermore, the risk of damage to contents is in some respects less than with buildings: residents leaving their home ahead of cyclones and fires often have the opportunity to take with them at least some valued possessions. Similarly, floodwater that might damage the lower levels of a home won’t necessarily damage possessions stored at a higher level in secure waterproof containers.
The discussion paper says that a second opportunity for NFP insurance exists in respect of third party property insurance for motor vehicles. Unlike the compulsory personal injury charge imposed on every Australian motorist through state and territory legislation, no jurisdiction mandates insurance coverage against property damage to other parties arising from the ‘at fault’ actions of the motorist.
In 2016–17 BSL will explore how NFP insurance might be used to overcome contents and motor vehicle insurance coverage shortfalls for the benefit low-income Australians. As well as seeking to capitalise on the lower costs that a NFP platform offers, BSL will identify low-cost distribution channels and partnerships with external agencies that can actively mitigate the risks.