Private disability insurance can relieve the public purse

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Private insurance could reduce the NDIS and DSP burden: FSC

Private insurance could reduce the NDIS and DSP burden: FSC

Life insurance can play a major role in reducing government welfare expenditure on the Disability Support Pension (DSP) and National Disability Insurance Scheme (NDIS) according to the Financial Services Council.

In its pre-budget submission to the Federal Government, the FSC says it is timely to consider whether the costs of the DSP and NDIS could be partially defrayed through personal disability insurance thereby transferring the risk to the private sector.

John Brogden, CEO of the Financial Services Council said: “The DSP is increasingly eating into the federal budget. In the current financial year the DSP cost the government $15.5 billion and this will increase to $18 billion by 2016-17.”

New research conducted for the FSC by KPMG shows 9.5 million Australians – 44 per cent of the population – could mitigate the economic risks of disability through personal disability insurance.

There were more than 50,000 new DSP claims in 2012-13.  If working Australians were adequately insured for disability, the government would save $340 million in the first year for new recipients of the DSP. In the tenth year this would equate to annual savings of $2.5 billion.

“The contribution of superannuation and life insurance will be critical for the Australian economy in the medium to long term,” Mr Brogden said.

“There is an opportunity for the government to share the financial risk and budget expense associated with acquired disabilities to the private insurance sector under the right policy settings,” Mr Brogden said.

He said a higher take up of private disability insurance would reduce pressure on public finances and will be likely to deliver a higher standard of living for disabled Australians.

The FSC’s pre-budget submission has recommended the government considers tax incentives and disincentives to increase the level disability coverage through private insurance and that the McClure Review of welfare payments considers how private insurance for disability could reduce the increasing use of the DSP.

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