Friday 10 February 2017
Senate Standing Committees on Economics
PO Box 6100
Canberra ACT 2600
To whom it may concern
Thank you for the opportunity to make a submission to the Senate Inquiry into Australia’s General Insurance Industry. Our submission covers two of the seven points in the Terms of Reference with a focus on vulnerable Australians:
Good Shepherd Microfinance is a world leader in financial inclusion products, services and advisory. We offer fair and affordable financial programs to people on low incomes, and advisory services with a global reach.
We work collaboratively with the corporate, government and community sectors to create people-centred programs that enable clients to realise their own economic wellbeing, as they define it themselves. This approach leaves clients feeling valued and in control of their finances and lives.
We’re guided by our mission to enable economic wellbeing for people with low incomes, especially women and girls, and by our values of human dignity, respect, social justice, audacity, compassion and reconciliation.
In 2013, Good Shepherd Microfinance, with the support of NAB, released a discussion paper on insurance access for people on low incomes titled ‘Covering the Essentials’. We received feedback from a range of sources including insurers, community sector legal centres and government agencies highlighting a number of important issues and barriers impacting people on low incomes such as:
In 2014 the Centre for Social Impact and the NAB published a report, Measuring Financial Exclusion in Australia. One of the report’s findings was that almost 20 percent of Australians go without general insurance. Non-insurance leaves people unprotected should they experience a loss, preventing them from confidently building assets or having reliable access to a car. This is especially true for people on low incomes, as they are least able to absorb financial shocks or readily replace lost assets.
These two reports led Good Shepherd Microfinance to develop a business case to design insurance products specifically to meet the needs of people on low incomes. Our Good Insurance program was established in 2014 and has collaborated with Australia’s two largest general insurers – Suncorp Group and Insurance Australia Group – to co-design new car and home contents insurance products that are designed: to address barriers to entry into general insurance contracts, build trust and understanding of insurance and protect low income consumers with appropriate insurance products and fair contract terms.
People on low incomes are acutely vulnerable to financial shocks. Replacing essential items like computers and whitegoods or repairing a car, can cause financial hardship and significantly disrupt daily lives – often these items are simply too expensive to replace.
Our Good Insurance program works with Australia’s largest insurance companies to create fair, affordable and simple insurance policies for people on low incomes. These products enable people to insure their household belongings or cars, so they’re protected if things go wrong.
If an insurance policy has been developed with Good Insurance, you know it has been designed for the customer, has affordable pricing and offers flexible payment options. Good Insurance co-created Australia’s first two insurance products designed for people on low incomes:
In addition to product development, we have also been working on educational materials to help people on low incomes understand the risks of non-insurance and under-insurance.
In 2016 we published, in partnership with the Queensland government, our Money Ready Toolkit, which addresses the issue of financial resilience in the face of natural disasters, for which general insurance is a fundamental requirement. For example, in Queensland one in three households has no contents insurance and one in 10 has no home insurance (2016 RACQ Household Cover Index).
We are also participating in the Victorian Government’s project to develop a strategy to encourage Victorians to take up, review and update their household insurance and thereby increase their resilience to emergencies.
Through this work, we have drawn some informed conclusions about the ‘barriers to entry’ for insurance for people on low incomes. We estimate that approximately 1.5 million people are directly impacted by these four fundamental barriers to entry for insurance:
The results of our Good Insurance program to date clearly demonstrate that these barriers to entry can be broken down through innovative approaches to what seem, at first glance, to be intractable problems.
There is clear evidence from our work that using a trusted local community organisation to provide information to vulnerable clients is effective in raising awareness of affordable and accessible insurance products and results in increased take-up of general insurance.
In addition, we would like to see the Unfair Contract Terms Regime extended to general insurance contracts as an important tool in protecting consumers and an opportunity to build trust with the industry.
There is a significant opportunity to expand our Good Insurance program to:
We are seeking to significantly scale our Good Insurance program to reach the more than 1.5 million people who need access to fair and appropriate insurance products. This would require seed funding from the Australian and State governments to establish the foundations of the Good Insurance program. We are also discussing opportunities with insurance companies to invest in sustainable products that will improve reputation and customer loyalty whilst also addressing this market gap.
Thank you for the opportunity to make a submission to this important Inquiry. Please contact myself or our General Manager – Innovation and Marketing, Renee Hancock, on 03 9495 9624 to discuss our work further.
Chief Executive Officer
Related Services: Good Insurance
Tags: Essentials by AAI, General Insurance, good insurance, Inquiry into Australia’s General Insurance Industry, Insurance 4 that