The insurance rip-off

[Green Left Weekly, #331, September 2, 1998]

WOLLONGONG — Two days after floods devastated this region, giant insurer NRMA attempted to deflect the second storm it knew would come by donating $250,000 to the disaster relief effort. Its cynical ploy fooled nobody.

Ever since it became clear that the insurance companies would reject most claims of residents hit by the deluge, the companies have been decidedly on the nose in the Illawarra.

"You cold and miserable lot!", screamed the headline of the opinion piece in the August 22 Illawarra Mercury. Editor-in-chief Peter Cullen got straight to the point: "Pay these flood victims, you miserable people ... you have inflicted on them a second tragedy, almost as chilling and painful as the first."

(Strong stuff, but the appalling "Mockery" hasn't changed its right-wing politics. It's just a bit of editorial posturing to meet the needs of the moment — a speciality of this Murdoch rag.)

Visiting notables reacted to the insurers' lamentable lack of community spirit. Governor-General William Dean said they had a "moral obligation" to meet flood damage claims. PM John Howard promised to approach the Insurance Council of Australia, as did his deputy, Tim Fischer.

According to an ICA spokesperson, quoted in the August 25 Sydney Morning Herald, most policies exclude damage caused by "rising" waters (flooding), but include damage from "falling" waters (rain). For thousands of affected residents, this distinction might seem artificial in the circumstances of the night of August 17-18. The issue will undoubtedly be tested in the courts.

Whatever the legal technicalities, it is clear that many residents paid their insurance premiums year after year — often for decades — believing that they were covered against all reasonable risks, only to find that their policies were worth nothing when the crunch came. Understandably, they feel bitter and betrayed.

It's a different story for the big insurance company shareholders.

Ever since recently floated finance giant AMP made its bid for insurance major GIO (privatised by the NSW Greiner Liberal government in 1992), share prices of other insurers have surged. There is a strong expectation among investors of a big shake-out in the industry.

All this highlights the realities of the situation. People want to have security against misfortune. But insurance is a business, a racket which generates profits out of people's well-founded fear of the financial consequences of theft, accident and disaster. As Malcolm X once put it, "You show me a capitalist, I'll show you a bloodsucker".

It's no use appealing to the insurers to show "compassion". The sole "moral obligation" they recognise is to make profits for their shareholders — and, in reality, not even for all of them. The only shareholders who count are the big investors, whether very wealthy individuals or other financial institutions.

The only way ordinary people will get security is if we get rid of the insurance "industry". Along with the whole financial sector, the insurance companies should be nationalised and a single state entity dealing with accident and disaster compensation established.

At the moment, there is a system of compensation for victims of violent crime. No doubt it has severe limitations, but it is non-contributory, and you don't need to have a violent crime "policy" to be eligible for a payout.

Why can't a similar scheme operate more generally? People should automatically be compensated for accidents and disasters. Whether such a scheme should be funded wholly out of general state revenue, or there should be a small annual contribution, is neither here nor there. Rationally organised, this society is surely rich enough to give all its members real security and peace of mind.

Will it happen under capitalism? Only if the broad workers movement takes up the demand and fights for it.

The ongoing struggles around workers' compensation in the various states show this very clearly. The employers and their governments will resist all attempts to make the bosses pay their way or limit their ability to gouge profits out of the rest of us.

The choice is clear: a system based on maximising business profits and "shareholder value", or one which prioritises meeting the needs of the vast working-class majority.