Given that we're talking a rental in Australia, this is not technically true.

All rentals in Australia include what would normally be termed as "insurance".

Injury to anyone other than the driver (including passengers, pedestrians and anyone in another vehicle) is covered under Australia's standard "Third Party Compulsory" insurance coverage that covers all registered vehicles. Damage to the rental vehicle is covered by the rental company, however there will be a relatively large excess - normally in the range of $2000 to $5500 for a standard car.

All rentals car companies offer a (sometimes capped) daily rate to reduce the excess, in much the same way as they might offer LDW/CDW in other parts of the world. Credit card/travel/etc insurances will also normally cover the excess, although some do have limits that may be below the $5500 mark. This will NOT be included in the award redemption.