Institutional Abuse Claim Lawyers

Out-of-home care deemed “uninsurable” after a flood of child sexual abuse claims

A flood of child sexual abuse claims since the Royal Commission into Institutional Responses to Child Sexual Abuse has caused an insurance market collapse, leaving some of New South Wales’ largest foster care services uninsured for child abuse claims.

Out-of-home care and youth homelessness service providers have been unable to renew their physical and sexual abuse cover since June 2021 when insurers began pulling out of the market due to the frequency of claims.

Ansvar Insurance, the biggest insurance provider in the space, withdrew from out-of-home care in June 2021. It continues to cover the childcare, disability and education sectors. Chief Executive Warren Hutcheon has said that the high-risk nature of out-of-home care has resulted in “unviable” pricing.

The mass exodus has forced the state government to create a short-term indemnity scheme with a limit of $5 million to cover incidents that have occurred since June 2017. This means the indemnity will not cover a large number of future claims.

The Association of Children’s Welfare Agencies (ACWA) has raised concerns with the state government about the insurance crisis which affects the Australian, Canadian and UK markets. Chief Executive Steve Kinmond said the crisis is so serious that it endangers the ability of non-government services to operate and ensure the safety of young people.

“The insurance market has done its sums and made a policy call that this whole area of practice constitutes too great a risk for the sector,” he said.

27 applications have been submitted by insurance providers to the indemnity scheme and 16 offers have been made. The scheme ends in December 2022. NSW upper house Greens MP David Shoebridge says the government needs to step in to establish alternative insurance.

“Insurers will only write premiums where they think they will gain a profit and in this sector, insurers have been losing millions of dollars to cover past claims,” he said.
“We’ve seen this sort of crisis in home building warranty, where all private insurers withdrew and now almost two decades later the state government is still having to provide insurance.”

One major out-of-care provider (who has remained anonymous) believes its commercial policy will not be renewed in June after a 300% increase in liability costs last year.

“We just feel really exposed. We take vulnerable kids on and by definition of their circumstances, we are quite liable. From a planning point of view, it makes it next to impossible. What kind of money do we need to set aside because of our lack of coverage?”