Don’t crowd fund cover

In times of disaster, many people without insurance beg for donations online, writes Anthony Keane

UNINSURED Australians suffering from personal disasters are turning to crowdfunding for financial assistance but are raising nowhere near enough money to help them recover.

People only raise an average $4600 through campaigns on GoFundMe, the largest of hundreds of fundraising platforms that have appeared globally in the past decade, says a new study by life insurance group Integrity Life.

It found that 35 per cent of Australians have donated money following the death, illness or accident of someone, while separate MoneysaverHQ research discovered hundreds of online requests for help from people recovering from house fires, flood damage, health issues or the death of a family member.

Integrity Life managing director Chris Powell said crowd-funding platforms should not be seen as a contingency plan.

“With underinsurance so endemic across life, total and permanent disability and income protection categories, GoFundMe and other crowdfunding platforms have become both a first stop and last resort,” he said. “Our research indicates that there are almost 11.5 million Australian adults who know they do not have enough life insurance in place to help them.

“No one is expecting to claim so unfortunately people put it off when faced with other competing financial pressures.”

Life insurance covering death, total and permanent disability, and income protection can usually be bought within superannuation at no cost to a household’s budget, while trauma insurance bought outside super pays a lump sum in the event of critical illness, such as cancer.

Mr Powell said the take-up of trauma insurance in Australia was less than 18 per cent, “partly because it’s a particularly tough conversation for anyone to have”. “A lack of adequate insurance is one factor that has led to the rapid rise of crowdfunding,” he said.

It’s not just life insurance shortfalls sparking requests for help.

Insurance Council of Australia spokeswoman Lisa Kable said research by understandinsurance.com.au had found that two-thirds of renters did not insure their belongings, while 10 per cent of travellers heading overseas did not buy travel insurance.

“When consumers are unable to cover their loss by using their own funds, they must rely on friends and family, charities or government assistance,” she said.

“Crowdfunding is now proving a popular option. Anecdotally, the public are becoming sceptical about these campaigns, especially when the beneficiaries could have covered their own loss through a low-cost insurance policy.”

Ms Kable said Australia’s insurers paid out more than $147 million in claims every workday.

“The financial assistance offered by crowdfunding, in many cases, covers only a fraction of the costs incurred,” she said. “Crowdfunding should not be seen as a viable alternative for deciding against buying insurance.”