17/09/2013 - 15:46

Builders say ERA missed point on insurance reform

17/09/2013 - 15:46

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The Master Builders Association says proposed changes to the state’s home warranty insurance scheme do not address the industry’s fundamental concerns and have the potential to lead to higher costs for new homebuyers.

The state’s economic regulator’s final report on its inquiry into WA’s home indemnity insurance arrangements was tabled in Parliament last week, with the report proposing to replace the existing scheme with a model that separates construction period coverage from the warranty period.

The Economic Regulation Authority recommended the insurance be provided by the private sector for the construction period, while the building industry would become the provider of voluntary warranty period insurance.

In WA, home indemnity insurance is required for all residential building work valued at more than $20,000.

It acts as a ‘last resort’ insurance to protect homebuyers against defaulting builders and structural defects on new homes and renovations.

The MBA has been lobbying for urgent reforms since 2010, primarily because there are only two providers currently servicing the WA market, QBE and Calliden.

In February this year, QBE sent shudders through the market after it announced a 40 per cent premium price hike, adding around $550 in extra costs for a $250,000 house.

Master Builders director Michael McLean said many builders would be unsatisfied with the ERA’s recommendations and viewed the report as a lost opportunity.

“We strongly question the ERA’s assumption that by reducing the scope of work which requires mandatory insurance to the construction period only, additional insurance providers will be attracted to the market,” Mr McLean said in a statement.

“Given that insurance providers have abandoned this form of insurance elsewhere in Australia, it is questionable whether any would continue to operate in a small market like Western Australia even with lower risk exposure.”

Mr McLean said the MBA would prefer a system of voluntary insurance, similar to a scheme already in place in Tasmania.

He said costs were likely to rise under the proposed arrangements if the governments charged the full cost of providing re-insurance, as recommended by the ERA.

“The ERA’s proposal to establish a safety net provided by the Building Commission for builders unable to access private insurance needs further investigation, as it is unclear how this system would work in practice,” Mr McLean said.

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