The launch last week of a new report by the Brotherhood of St Laurence on insurance for low-income earners doesn’t reveal any dramatic new facts. While it’s a worthy and important document, what was perhaps more immediately interesting to onlookers was who launched the report – Assistant Treasurer Bill Shorten.

With investigations launched into the ways insurers should handle natural disasters and various intense reforms of other branches of the financial services sector moving along, Mr Shorten is now showing more interest in the insurance industry – certainly more than his recent predecessors.

The Reducing the Risks report by the brotherhood calls for widespread reform of the insurance industry to make it more efficient and equitable for low-income consumers. This includes renters’ insurance for contents and more flexible vehicle insurance.

The report notes there are already some products aimed at the low-income group, including “StepUP insurance” offered by NAB and Good Shepherd Youth and Family Services.

This insurance complements StepUP loans for people who are unable to access mainstream mortgage products from the larger financial institutions.

There is also Community Housing Insurance Australia, which offers cover for people living in social housing.

The brotherhood notes that online insurers have made products more affordable, but adds that many low income-earners don’t have access to the internet, and the lack of face-to-face communications is seen as a barrier to them taking out insurance to protect their vehicles.

Brotherhood Executive Director Tony Nicholson says underinsurance in low-income consumers is “a serious problem”.

“These people are those who suffer the most precisely because they have less capacity to replace damaged vehicles or whitegoods – and this is the purpose of insurance,” he said.

“To not have their needs met is a serious mismatch in supply and demand.”

The brotherhood is calling for insurers to accept regular small payments, possibly through Centrelink, to help low-income consumers afford insurance products.

It also wants “insurance with rent” products developed, with a lower value minimum for the goods to be covered.

On vehicle insurance, the brotherhood wants the design of products to be improved to enable third-party cover to include replacement of damaged vehicles.

“The idea that if you have less than $25,000 worth of furniture and whitegoods it’s not worth insuring it is an insult to a huge number of struggling Australian families,” Mr Nicholson said.

“Major insurers are missing the point here, and insurers are cherry-picking wealthier clients and leaving vulnerable Australians behind.”

Such comments could be easily shrugged off as the opinions of a worthy organisation that aims to help people who are struggling with the needs of everyday life.

But Bill Shorten’s opinion is a lot harder to shrug off. Perhaps the insurance industry should be concerned that the Assistant Treasurer agrees with the brotherhood and has again emphasised his interest in reforming the perceived shortcomings in general insurance.

Speaking at the Melbourne launch, Mr Shorten said the low-income sector needs special attention.

“The approach governments and insurers take to chronic underinsurance among people and households who are on low incomes and are especially vulnerable… should always be markedly different to the approach we take to the underinsured across the more general, and more financially secure, Australian community,” he said.

“As long as the insurance products on offer are fair and reasonable, if people can afford insurance but choose not to take it out – the bottom line is that’s their problem.

“If people can’t afford insurance and therefore don’t take it out – that’s our problem.”

Mr Shorten says he was moved by people affected by the recent floods, but cites the amount of public funding given to people with little or no insurance as a feature that reinforces the problem for the whole community.

While the insurance industry’s role in the recent disasters has been acknowledged by Mr Shorten, he has warned there are “compelling arguments for reform”.

“The case for a standard definition of flood has in fact been around since the Newcastle area floods of 2007,” he said.

“And the sometimes absurd complexity of product disclosure statements in insurance policies has surely been obvious for far longer to anyone that has taken the time to read a few in the modern insurance market.

“Participants in the study groups convened for the brotherhood’s report felt that product disclosure statements are too complex and the fine print too daunting. I agree.”

The minister has taken the recommendations of the brotherhood’s report to heart, and suggests they could be discussed at a future Insurance Reform Advisory Group meeting.

An Insurance Council of Australia (ICA) spokesman told insuranceNEWS.com.au today the industry “has recognised the need to provide accessible and affordable products that are available and within the reach of all Australians”.

“The brotherhood’s report is an important contribution to identifying the challenges and barriers to achieving this goal,” he said.

But ICA accepts more needs to be done in this area to encourage an increased take-up of insurance among low-income earners.

It cites the work done on a financial literacy program for lower-income groups as an example of how the industry is responding.

But despite the industry’s interest in changing its approach to the disadvantaged of our society, Mr Shorten has an agenda to reform the things that just don’t work as equitably and efficiently as they should. General insurance is without doubt the next in line after he has finished with the financial planning industry.

He told the brotherhood function that insurance regulation is “in a state of flux”.

“The Government is determined to make insurance policies simpler and easier to understand through our proposals for a common definition of flood and a ‘key facts’ statement,” he said.

And as Mr Shorten seems determined to reform areas that the insurance industry has not fixed for itself, it looks like there could be a long summer of wrangling ahead.

Just ask financial planners what happens when a minister takes a determined look at your industry.