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Insurance costs exclude too many

OPINION PIECE: With the likelihood of climate disasters promising to increase, insurance becomes more expensive but more essential. Ross Womersley explores the issue.

The 20th of December marked the two-year anniversary of when the Black Summer bushfires hit Cudlee Creek, killing one person, and destroying 72 houses and 227 cars. Fires continued into January, when Kersbrook and Kangaroo Island burned. The independent review into that bushfire season found that “A significant proportion of properties and businesses were underinsured or uninsured”. For these people, the effects of losing their homes or their vehicles must have been anything up to catastrophic.

SACOSS has known that lack of insurance has been a problem for many people for a long time, but we’ve never had the resources to examine what could be done to fix this. For decades research has shown that there is a significant proportion of our community who lack insurance for their home, contents, or their car. I personally, like many people, have been shocked to see the rate at which my own insurance premiums have been increasing. Imagine what it is like, then, for people on low incomes who need to find the money in a really tight budget to put aside to cover these premiums, or for someone who lost their job during Covid-19. Putting aside the issue of the complexity of ensuring you have the right cover without problematic exclusions, the reality is that for many households, insurance premiums seem impossibly out of reach. Add to this the financial strain the pandemic has brought to many households that has meant they have had to let their insurance lapse, unable to keep paying the premiums.

Finally, add to this that natural disasters will continue to increase in frequency and severity because of climate change, and it looks like a perfect storm. We are again going into dreadful natural disaster seasons with a contingent of people who cannot afford insurance, who are at risk of losing everything. When a disaster inevitably hits, these people will fall into poverty, or have their poverty further entrenched, and potentially become homeless.

So what can we do about this issue, before disaster strikes? Our recent research shows that there are some innovative models that have been used around the world to improve access to insurance, like the insurance-with-rent schemes for social housing tenants in the UK, and the ‘CARD’ group of non-government organisations in the Philippines that provide affordable mutual insurance to members. We could introduce a new concession, to provide eligible people with a rebate on their home, contents, and vehicle insurance. Particularly in the face of climate change, insurance must start being seen as an essential product. We can either help people who can’t afford it to pay now to prevent the worst, or we can pay as a society, as a community, when the next natural disasters hit.

Ross Womersley is CEO of the South Australian Council of Social Service. This opinion piece was published in the Advertiser on 22 December 2021.