Funding is likely to be the biggest challenge for the proposed disability insurance scheme, according to lawyers who work in the area. “The [proposed] scheme will be federated. It might mean local government rates rise, or a rise in the cost of rail tickets or a levy on the regular private body and GP insurance,” said Matthew McDonald, a partner with insurance specialist Curwoods. “That could have an indirect effect of making premiums more expensive and could affect where people choose to buy their insurance.”

The proposed disability insurance scheme’s personal injury insurance is also likely to have an impact on insurance clients and the business models of major insurance firms, according to McDonald. Catastrophic injuries, such as damage to the spinal cord, brain damage and burns to more than 40% of the body happen to around 1,000 people each year according to the Productivity Commission report released last week. Of those catastrophic injuries, 32% could be classed as “general injuries” or public liability claims, which according to McDonald could mean insurers end up receiving cheaper claims depending on how the government decides to fund the scheme.

The scheme could lead to cheaper products being offered which don’t necessarily provide cover for catastrophic injuries. “Insurers might be smart to offer a product that is cheaper to buy but that doesn’t cover you if you have a defined ‘catastrophic injury',” said Alex Ward, president of the Law Council of Australia.

The Council of Australian Governments (COAG) formally agreed to reform disability services in Australia through a Disability Insurance Scheme on August 19.