Posted 17/10/2019 by David Watt
Purpose of the Bill
The Defence Service Homes Amendment Bill 2019 was introduced into the Senate on 19 September 2019. It seeks to amend the Defence Service Homes Act 1918 to expand eligibility for coverage under the Defence Service Homes Insurance Scheme.
Background and history
During the 2019 federal election campaign the Prime Minister and the Minister for Veterans’ Affairs announced that the Government would extend eligibility for the Defence Service Homes Insurance Scheme to ‘allow any current or former ADF member who has at least one day of service to access home building insurance through the Scheme’. It is intended that the change will take place from 1 January 2020. The rationale for this change is so that veterans:
… can access more competitively priced home building insurance, particularly in disaster prone areas, which will lower the cost of living for veterans and their families, particularly in northern Australia.
The Defence Service Homes Insurance Scheme is a concessional scheme administered by the Department of Veterans’ Affairs (DVA). The Scheme has existed since 1919 (it was known as the War Service Homes Insurance Scheme) when it was a requirement for those people who had a home built under the War Service Homes Scheme to have insurance to protect the property against fire and other risks. It has always been entirely funded by the payment of premiums and has not received direct funding from the Australian Government since its inception. The Scheme receives a lower rate of return on its investments than private sector insurance providers but does not have to pay dividends to shareholders. The Scheme offers no excess on claims and various other features that are advantageous to policyholders.
The Defence Service Homes Act limits the Scheme to the provision of home building insurance. However, the Scheme acts as an agent for other insurance products, which are provided through an arrangement with QBE Australia. A commission is payable to the Scheme for the sale of such products.
According to the Explanatory Memorandum for the Bill, the Scheme currently provides coverage for 52,000 eligible persons and does so in competition with other insurers. It is the only insurance scheme of its type to be offered by the Australian Government.
The amendments proposed in the Bill seek to replace a complex set of eligibility criteria that have been developed over the 100 years of the Scheme’s existence. The current criteria limit access to an Australian veteran, a serving member of the ADF, a Reservist, (or a widow/widower of these persons) who qualifies for:
In practice the Scheme is generally only available to those people who have seen warlike service or who are currently serving in the Australian Defence Force (ADF) and who have had a minimum of four years service. The Explanatory Memorandum states that the average age of current policyholders is 70 and that the Scheme has a declining number of policyholders.
Further, the measure is directed towards the higher cost of home insurance payable by ADF personnel who are stationed in disaster prone areas such as northern Australia and the lesser choice available to them when buying affordable home insurance.
The current Bill
The Bill seeks to amend the Defence Service Homes Act in order to expand and simplify the eligibility criteria for the Scheme to include all current and former ADF members who have at least one day of continuous full-time service, including reservists and peacekeepers. Eligibility will also be extended to widows and widowers of these people.
In order to achieve these aims, the Bill inserts a new set of ‘eligible recipients’ into the Act’s definitions. These are:
- a member of the Defence Force or a former member of the Defence Force or
- a member of a Peacekeeping Force or a former member of a Peacekeeping Force or
- a widow or widower of those persons.
Similarly, amendments to section 38C of the Defence Service Homes Act remove existing and more complex rules governing the dwellings that the Commonwealth can insure under the Scheme and substitute rules which allow insurance to be provided to dwellings that are wholly or partially owned by the ‘eligible recipients’ set out above. The new provisions also allow for insurance to be issued for land on which a dwelling is to be located and in cases in which an ‘eligible recipient’ resides in a retirement village.
New section 38E sets out the conditions under which insurance can be terminated. In particular, in the event of the death of an ‘eligible recipient’ the Secretary must give reasonable notice to any person with an interest in the dwelling or retirement village that the insurance will be terminated.
The Explanatory Memorandum notes that the changes will make the Scheme available to an additional 300,000 or more serving ADF members and veterans.
Committee consideration
At the time of this FlagPost’s publication the Bill had not been considered by a Parliamentary Committee.
Financial impact
The Explanatory Memorandum states that the financial impact of the Bill will be nil. As noted above, the Scheme is self-funded.