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Call for SA insurance concession scheme as natural disasters hit home

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A concession scheme to help low-income earners afford rising insurance premiums is urgently needed, the state’s community services peak body says, after South Australia’s summer storms highlighted the issue of underinsurance in regional communities.

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The South Australian Council of Social Services today released a report titled Protecting the Basics: Insurance access for people on low incomes at risk from climate emergencies, which was tasked with investigating ways to improve access to home, contents and vehicle insurance for low-income people.

The paper found that insurance premiums in South Australia are “rapidly” rising and have more than doubled since 2000.

The community services peak body also highlighted consumer prices index data showing home, contents and vehicle insurance premiums in SA increased by 8.1 per cent on average in 2021, compared to 3.4 per cent nationally.

SACOSS’s report estimates one in two or one in three people in SA living on low income do not have contents insurance, while one in four people on low income who own a vehicle do not have car insurance.

“Natural disasters are increasing due to climate change [and] people on low incomes are more likely to live in areas with higher risk of natural disasters because the housing tends to be cheaper,” the report states.

“People on low incomes are unlikely to have the resources or power to engage in much mitigation (because they’re renting, and/or because of the cost).

“All of these factors combined risk widespread uninsurance … with climate change increasing natural disasters, redressing the current situation is urgent.”

It comes as South Australia’s regions continue their recovery from a series of summer storms – some described by the Bureau of Meteorology as “one in 100-year” weather events – which caused widespread infrastructure damage across the state.

It also comes amid deadly floods on the eastern seaboard, with seven people in Queensland now dead and thousands of properties in and around Brisbane damaged due to flooding.

South Australian Financial Councillors Association executive officer Kate Fox said underinsurance had come into focus amidst South Australia’s recent wild weather.

“It does come up, I’ve certainly been speaking with financial counsellors and insurance in relation to [those storms],” she said.

“There were a lot of people who were either uninsured or underinsured and the impacts of that has been quite significant.”

SACOSS CEO Ross Womersley said the recent floods “absolutely bring this home as a matter of urgency”.

“The biggest consequences is that we leave a whole lot of people in incredibly vulnerable circumstances, people who may have worked for an extended period of their life to build up an asset base” he said.

“Without insurance in these contexts, the only way that you can replace those items is if you have a whole lot of money behind you, and of course if you’re a low-income family, you’re simply not going to have those kind of resources at hand to build back.

“If we’re thinking about regional Australia, if you don’t have access to a vehicle, then your capacity to get to and from work is almost non-existent … the impacts can be immediate and profound.”

The three primary recommendations from SACOSS’s report to improve insurance affordability are:

The report argues that an insurance concession scheme, which SACOSS suggests implementing through a boost to federal rent assistance or a rebate through Concession SA, would have broader societal benefits.

“As well as making insurance premiums more affordable, this would signal the importance of people holding these insurance products, which may also facilitate greater uptake,” the report states.

“If concessions are introduced, the government should resource non-government partner organisations to facilitate access to the concessions for communities that would benefit from the support.”

On the issue of social housing providers supplying contents insurance, SACOSS argues the relationship between social housing providers and tenants – as opposed to private landlords and tenants – provides a “unique opportunity” given the provider’s “mandate to support the wellbeing of tenants”.

“Given all social housing properties presumably have building insurance, there may be opportunity to extend this to cover tenant contents, or to separately purchase a different microinsurance product … on behalf of tenants,” the report states, citing evidence of a successful trial in the UK of 10,000 social housing tenants being given contents insurance.

“People exiting social housing could be supported with information to take out their own future contents insurance.”

SACOSS suggested funding the three proposals through increasing property taxes, redirecting some of the $6 billion in private health insurance subsidies and imposing a tariff on all insurers operating in Australia “to fund a pool that could be used to address access to insurance for people on low incomes.

Womersley said SACOSS would be taking its insurance concession policy to both major parties ahead of the upcoming state.

“Certainly as we’re coming into an election, we’ll be saying to whoever wants to form the next government that this is a very good way of helping people future proof and protect them from becoming impoverished in the future,” he said.

“Helping people get and maintain insurance ought to be an essential focus, given that insurance is so unaffordable.”

SACOSS, which researched the subject from June to December 2021, rejected other policy levers including removing stamp duty, government reinsurance, group policies, parametric insurance and pay as you drive car insurance, saying they were “unlikely to be the best strategies to address affordability of insurance in South Australia”.

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