Months of intense bushfires over the summer destroyed more than 2500 homes. The total bill for the damage done to people’s homes is expected to surpass $2.5 billion.
The lives of thousands of families have been thrown into chaos, but things are being made worse by big problems with the insurance industry.
A crisis of underinsurance, where people don’t have enough insurance to cover serious losses, threatens to stop thousands of people from rebuilding their lives. The bushfire crisis exposes how millions more would face a desperate situation if disaster struck.
The Insurance Council of Australia estimates that as many as 80% of all homeowners are underinsured. Approximately 1.8 million Australian households don’t have any home insurance at all! The main reason is the high cost of insurance premiums.
The Australian Competition and Consumer Commission (ACCC) has found that high premiums in certain areas results in double the number of uninsured households.
The ACCC has also lifted the lid on how insurance companies prey on those who struggle to keep up with their premium payments. Instead of offering genuine hardship support, big insurers often impose fees worth hundreds of dollars to be allowed to pay in instalments.
Three-quarters of the insurance market is dominated by four private companies. The industry raked in a massive $4.4 billion in profit last year.
While the fires were still burning, these profiteers moved to stop people accessing insurance cover. The two biggest insurers, Suncorp and IAG, stopped selling new policies, or were flatly denying new claims, in some bushfire-prone areas in New South Wales and Victoria.
They only withdrew this policy due to a huge public backlash but, even then, it was after the fire conditions eased.
Many people have reported nightmare experiences fighting with insurance companies that are trying to deny their claims. Traumatised victims who lost paperwork faced delays, a drawn-out process, and interrogations just for asking for what they were entitled to.
These issues have created the conditions for dodgy ‘claim advisers’ to thrive. These people target vulnerable communities, sometimes cold-calling victims, offering to help with difficult claims. They usually only end up costing the victims extra fees.
Even before the dust has settled, many of the big insurers have started shifting the financial burden onto consumers. Many people in bushfire affected areas have already been told that their insurance premiums will increase by as much as 50%!
This has been described as “common industry practice” by some commentators, but it’s really just a rip-off. At the end of the day higher premiums will only deepen the crisis of underinsurance, and even force those unaffected by the disaster to shoulder the costs.
The big insurers need to have their grubby behaviour exposed, but we need to go further and fight for an alternative to their profit-first model. Putting shareholders before the needs of those suffering from a disaster clearly doesn’t work.
The best alternative would be to bring all the big insurance companies into public hands. They could be replaced with a single publicly-owned insurance agency that operated on a not-for-profit basis.
A publicly owned insurance agency could utilise the enormous resources already accumulated to provide high-quality relief to people affected by disasters or other accidents.
Premiums could immediately be made affordable, claim response times could be reduced, and red tape slashed. It could provide good quality jobs for people all around the country.
A public service like this could be run efficiently if was democratically controlled by the community, rather than run by overpaid corporate executives or unelected government bureaucrats.
A model like this could be a step towards a national home insurance guarantee that covered all private homes. A home insurance guarantee could be funded by taxing the enormous profits of big business, but a better solution would be to socialise even more of the key parts of the economy.
In this way the wealth created could be used to invest in the things that people, rather than corporations, think are important.
This would lay the basis for resources to be used to tackle things like climate change, bushfire mitigation, and to ensure that affordable housing and proper support for those impacted by disasters is provided to all.
By Triet Tran