The Master Builders Association has warned the state government’s decision to place builders’ warranty insurance in the hands of two providers will result in rising costs of construction, which will ultimately be passed on to homebuyers.
The Master Builders Association has warned the state government’s decision to place builders’ warranty insurance in the hands of two providers will result in rising costs of construction, which will ultimately be passed on to homebuyers.
THE Master Builders Association has warned the state government’s decision to place builders’ warranty insurance in the hands of two providers will result in rising costs of construction, which will ultimately be passed on to homebuyers.
Commerce Minister Bill Marmion announced last week the state government had completed negotiations with QBE Insurance and Calliden Group to provide home indemnity coverage in Western Australia for a fixed three-year term.
The agreement was necessary after the nation’s largest provider of builders’ warranty insurance, Vero Insurance, announced earlier this year it would no longer provide coverage in WA after June 30.
In WA, the insurance is required for all residential building work valued at more than $20,000, and the state government held an agreement with insurers, including Vero, to provide indemnity for projects worth between $10 million and $90 million.
MBA director of housing and economics Gavan Forster said the government’s decision to remain with an involuntary scheme of builders’ warranty, administered by two insurance companies, was the industry’s third-ranked preference.
Mr Forster said industry would have preferred a voluntary scheme, or a government underwritten scheme, similar to regimes in place in Queensland, and from July 1, New South Wales.
“I’m hopeful that the transition to the two insurers will be smooth, but with only four weeks to go, I could foresee some problems with builders switching over from Vero,” Mr Forster said.
“The pain may be purely in the transition, and the forms that have to be filled in. With QBE it’s a six page form, and if that’s the least of their problems then that will be great, but issues about whether they will actually get the same cover and at the same price, they are the concerns.”
He did not expect Calliden, which he described as a minnow in the marketplace, would be in a position to provide insurance for large builders.
“In effect, what the government has done has delivered, for the large builders, a monopoly to QBE,” Mr Forster said.
“So there is the potential for higher premiums and it’s the customers that pay at the end of the day. Any restrictions that are put on the builders, that causes them grief; but also it will be the higher prices that consumers pay for their houses.
“We had one quote from a builder where his previous price was $1,400 for the premium, whereas the price from Calliden was $14,000.
“That’s an extreme case, but it shows you that this is what can happen when you’ve only got a choice of two.”