Gaming reform: What is the impact on the insurance industry?

“I can’t see any obvious risk correlation between the property insurance of commercial premises and gambling activities carried out on them, absent the involvement of organised crime and a turf war,” said industry veteran Fred Hawke (pictured above), a consultant for law firm Clayton Utz and faculty member of the Australian College of Insurance Studies (ACIS).

Cashless gaming cards

Hawke said the current reform measures being debated in NSW, including cashless gaming cards, could reduce the liability of the businesses who run legal gambling operations.

“Looking at the liability side, the sorts of measures being talked about, if they have any effect at all, would seem more likely to reduce the quantum of problem gamblers’ losses, at least at the relevant premises, and, by extension, the risk of litigation against the proprietor,” he said. “In short, it seems to me that the overall effect of the proposed gambling measures is more likely to be positive than negative, from an insurance perspective, but is most probably neutral.”

He said a reduction in premium rates as a result was unlikely.

If, on the other hand, governments outlawed gambling – which Hawke thought very unlikely – the resulting involvement of organised crime, he said, would likely increase the liability issues of clubs, pubs and other gambling locations.

However, he suggested that some insurance companies would likely be undeterred by this situation.

“Even if criminals were to take over the gambling industry, the insurance industry probably would still step up,” said Hawke.

The Gentlemen’s Club v Calliden Insurance

The insurance law expert referred to the Stealth Enterprises Pty Ltd t/as The Gentlemen’s Club v Calliden Insurance Limited [2015] NSWSC 1270.

“In that case,” he said. “The fact that the insurer had been target marketing to the industry in question, knowing the sorts of people likely to be involved in it, was what torpedoed the insurer’s non-disclosure defence.”

Hawke said that the insurance industry’s definition of “moral hazard” is highly selective.

“It has nothing to do with the presumptive vice or virtue of the activity for which they are seeking cover,” he said.

Hawke said this concept refers only to an insured’s propensity to understate risk on the proposal “or mount a dodgy or inflated claim.”

“Sometimes, handing an industry over to criminals to run can even have a positive effect on the claims experience,” said Hawke, only half joking. “I’m tipping Al Capone’s breweries didn’t get too many product liability claims.”

However, he also noted that insurance coverage capacity against piracy off the Horn of Africa had improved significantly since the Chinese started “blowing zodiacs out of the water a few years back.”

So Hawke suggests the likely insurance industry impact of any gaming reform in NSW will be neutral.

Should the industry do more to risk manage gambling?

However, the other insurance industry issue in this debate: what is the industry’s responsibility, if any, towards risk managing customers whose business activities can cause societal harm?

Anti-gambling advocates and other critics want major gambling reform across the country. The Australian Institute of Health and Welfare (AIHW) estimates that Australians spend about $25 billion on legal forms of gambling per year, the largest per capita losses in the world.

“Gambling is a major public policy issue in Australia, affecting the health and wellbeing of individuals and families in a range of ways,” says the AIHW on its website.

In January, figures widely reported in the media and released by Liquor and Gaming NSW showed that in 2022 poker machine gamblers made their highest losses in NSW history. Despite the cost-of-living crisis, NSW gamblers spent more than $2 billion on poker machines in less than 100 days. Meanwhile, according to the data, clubs and pubs brought in about $23 million per day in profits from poker machines alone.

What’s your view on the industry’s risk management and other responsibilities towards clubs, casinos and other locations where legal gambling takes place? Please comment below.