Calls for subsidies as low-income Australians see insurance as a luxury they can no longer afford

Malcolm Battersby can keep his shopping bill down by growing his own vegetables.

“I still have tomatoes from the last harvest in the freezer, so it’s really, really good,” he said.

“Without that, it’s just more expense.”

But the Tasmanian pensioner feels helpless when it comes to reducing the cost of his insurance bill.

He switched insurance providers for his home and contents insurance policy three years ago, but the cost has increased by $300 every year since.

“If this continues, I expect that within five years I will be paying over $3,000 a year just for insurance,” he said.

“It’s always the low-income people who seem to get hammered.”

Mr. Battersby knows the risk of not having insurance. His house was one of the few on his street left standing after bushfires tore through the Tasman Peninsula in 2013.

“Some people had no insurance and they were in a lot of disputes. The man across the road, he slept in a tent for good years.

Malcolm Battersby can only afford liability insurance for his car.(ABC News: Maren Preuss)

“I know the risks of not having insurance and I will try hard to keep paying the premiums.”

But when it comes to insuring his 20-year-old car, Mr Battersby can only afford third-party cover.

He said without the car he is “stuck”, describing nearby public transport as unreliable.

He backs calls for insurance to be considered an essential service.

“With the electricity bill they give us a discount, with the rego we get a discount, so that’s just another essential. I just think the government could be a bit more generous,” he said. -he declares.

No insurance means “rooted poverty”

The cost of insurance increased by 3.4% between the June 2021 quarter and June 2022, according to the Australian Bureau of Statistics.

Julia Davis of the Financial Legal Rights Center said “part of it is the number of claims insurers are paying and the rising cost of those claims.”

Price increases were even higher in some states.

“In Tasmania alone, insurance has grown by 5.8% over the last year and that really puts it out of reach for many Tasmanians living on low and middle incomes,” said Adrienne Picone of the Tasmanian Council. of Social Service (TasCOSS).

“A recent report…showed that even people living on incomes between $50,000 and $99,000, of whom – half said they were unlikely to get insurance because they couldn’t afford it,” she said.

A woman sitting at the desk.
Adrienne Picone says even Tasmanians on $90,000 a year struggle to afford insurance.(ABC News: Adam Langenberg)

A 2021 report from the South Australian Council for Social Services (SACOSS) found that up to one in three low-income people lacked contents insurance.

The report warns of the increased risk of natural disasters due to climate change in Australia:

“There will be a greater risk of bushfires, droughts, floods and coastal hazards from sea level rise, coastal erosion and coastal storms.

“The consequences of uninsured people will increase dramatically as the frequency of natural disasters continues to increase with climate change.”

Flood fallout expected to push premiums higher

One million households in Australia are already facing “extreme” levels of insurance stress and will bear the brunt of future premium hikes driven by climate change, research has warned.

A man wearing a hat descends the steps of a house.
Malcolm Battersby backs calls for insurance to be considered an essential service.(ABC News: Maren Preuss)

The Insurance Council of Australia said premiums are likely to rise further following catastrophic flooding in Tasmania and Australia’s east coast.

CEO Andrew Hall said collectively it was the biggest flood in Australian history.

He said poor long-term planning in flood-prone areas and rising reconstruction costs were forcing premiums to rise.

“I expect premiums to remain in an upward cycle, largely because the cost of construction and repairs, labor costs, have all gone up across the board,” he said. he declared.

An aerial view shows widespread flooding in Latrobe.
Many towns on the east coast were partially submerged by floodwaters after heavy rains in October.(ABC News: Luke Bowden)

The cost of auto insurance is also becoming increasingly unaffordable for many.

The South Australian Council of Social Service (SACOSS) report found that one in four low-income car owners did not have comprehensive car insurance.

“Our fact sheet on having a car accident and being uninsured is one of the most popular fact sheets on our entire website,” said Julia Davis.

A woman with brown hair and glasses smiles at the camera
Julia Davis says climate change and severe weather will exacerbate the consequences of being uninsured.(Provided)

She said that without insurance, in the event of an accident or car theft, “they just don’t have options, they just can’t absorb that kind of loss and without insurance, we can’t do much to help them.”

“People on low incomes will be the least resilient and the least able to bounce back from a bad event, from theft or an accident or an electrical fire or something that destroys their home or their rental property or their possessions,” he said. she declared. said.

“They won’t have a reserve of savings to rely on, they won’t be able to easily and quickly access credit to replace their assets.

“If they don’t have insurance, it will be very difficult for them to get back on their feet.

“It may just entrench poverty for people who are already struggling.”

Calls for insurance to be an “essential service”

Portrait of Malcolm Battersby on the deck outside his home.
Malcolm Battersby is able to cut food costs by growing his own vegetables.(ABC News: Maren Preuss)

In Australia, the only way to protect assets is to purchase insurance in the private market.

“There will always be vulnerable, low-income members of our society who cannot afford market rates for all services,” said Julia Davis.

“Insurance plays a very important social role in this country in keeping communities resilient and united.

“I just think it’s time to start talking about insurance as an essential service.”

This could mean a federal government insurance subsidy for low-income people.

“You need really smart people in the room to design them so you don’t end up with perverse results where insurers just raise their prices for these people,” Ms Davis said.

“You could give discounts at tax time, that’s what we do with health insurance.”

There are also calls for content insurance arrangements to be made for people living in social housing.

“We need to provide them with subsidies so they can pay for contents insurance if they are affected by fire,” Ms Picone said.

Subsidies won’t help with ‘long-term resilience’

Malcolm Battersby watches the water from the deck of his house.
Mr Battersby says a neighbor had to sleep in a tent because he couldn’t afford fire insurance and his house was destroyed. (ABC News: Maren Preuss)

In a statement, a spokeswoman for Treasurer Jim Chalmers said the federal government recognizes that “the affordability and availability of insurance is a concern for many Australians, particularly in areas vulnerable to natural disasters”.

“The government has committed to allocating up to $200 million a year from the Disaster Ready Fund, which will invest in disaster resilience projects.

“The reduced risk of damage to homes and businesses will put downward pressure on insurance premiums, particularly for Australians in disaster-prone areas.”

But the spokeswoman warned that “grants provide short-term financial relief, but they will not ensure long-term resilience”.

Kellie Caught of the Australian Council of Social Services (ACOSS) said the federal government had focused on a risk-based mitigation model.

“He hasn’t really looked at how to make insurance more affordable, especially for low-income people, so we’re asking for a review,” she said.

“Some of the things that could be considered [are] help low-income people mitigate risk by improving their homes so they are less exposed to extreme weather events.

“In some cases, if needed, helping low-income people move to places where there are fewer extreme weather events.”

A woman with blonde hair smiles at the camera
Kellie Caught says the federal government should consider steps to make insurance more affordable for low-income people. (ABC News: Dean Caton)

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