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Builders warranty insurance receives support from state governments

By Jeanette Stephen

The governments of New South Wales, Victoria and Western Australia have stepped forward to ensure continued protection for the building industry.

The Self Insurance Corporation (SI Corp) in New South Wales and the Victorian Managed Insurance Authority (VMIA) have been formed to take over the management of Builders' Insurance.

Builders' Insurance – or Home Indemnity Insurance in Western Australia – offers cover to home owners and renovators in the market when a builder cannot complete or rectify a project.

The new scheme began operating on a commercial basis in Victoria on 31 March and will be introduced to New South Wales on 1 July.

Both states have appointed QBE Insurance and the Calliden Group as sole agents for the cover.

Victorian builders with private insurance for the past 15 months will be automatically eligible for cover from the VMIA for a year with underwriting terms and conditions “initially on comparable terms as their previous provider.”

The VMIA will also continue to use current brokers to minimise disruption to the industry.

In WA, the Government has agreed to retain the current mandatory scheme of private home indemnity insurance for three years.
 
The reforms follow the 2009 exit of CGU and Lumley Insurance from the market in each state and the recent decision by Vero – the nation's largest provider of builders' warranty insurance – to end its coverage of new builders' policies from 1 July.

The governments’ underwriting scheme is expected to safeguard thousands of jobs across the building industry, while providing a safety net for homeowners and renovators with incompleted projects due to financial insolvency.

In NSW, Home Warranty Insurance is compulsory for all domestic building work (including renovations) valued at more than $12,000, providing up to $300,000 in cover.

Any cover that has already been issued by NSW insurers will remain in force for the duration of the policy.

The current WA scheme requires all residential building work valued at more than $20,000 to be covered. However a new “deed” between QBE Insurance and the Calliden Group will see the WA Government providing indemnity for claims between $10m and $90m from the collapse of any one builder in the next three years.

The Executive Director of the WA Building Commission, which is a division of the Department of Commerce, said the industry was responding in accordance with the market's changes.

“Different states have responded to the withdrawal of insurers in different ways,” he said. 

“New South Wales and Victoria have decided that the state should be the sole underwriter, using insurers as agents to write and manage claims.

“Western Australia and South Australia have decided to keep private sector underwriting, supplemented on a short-term basis with risk sharing by the state to ensure a smooth transition of builders to other insurers.”

Further information is available for builders and homeowners on 133 679 in NSW, 1300 815 127 in Victoria and 1300 489 099 in Western Australia.