08/04/2010 - 00:00

Industry calls for private warranty system

08/04/2010 - 00:00

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More bureaucracy would be the worst outcome from the state government’s review of housing indemnity insurance.

Industry calls for private warranty system

AS the housing industry waits for the government to reveal its plans for builders’ warranty insurance, the Housing Industry Association has urged the state to leave the coverage to the private sector.

The state government is expected to reveal how it will respond to the withdrawal of Australia's largest builders’ warranty insurer, Vero, within the next week.

The withdrawal of Vero from June 30 will leave the WA builders insurance market with just two major players – QBE and Calliden.

In February, Commerce Minister Troy Buswell told a press conference the government had two options; to introduce a voluntary scheme of builder’s warranty insurance as employed in Tasmania; or to provide the insurance in its own right, as New South Wales has decided to do from June 30.

B & L Green Constructions managing director Brendan Green said the withdrawal had placed extra demands on smaller builders that have coverage through Vero, and were now required to submit detailed financial information to new insurers.

“Basically it’s placing a restriction of trade upon builders,” Mr Green said.

“It’s already a tough industry and now there’s another hurdle that you’ve got to jump over.

“It’s put more pressure on, whereas we were getting insurance responses in two days prior to all of this, its now three weeks, you have to present all of your financials and it’s just a nightmare.”

Housing Industry Association WA executive director John Dastlik said the industry would be best served if a private insurance scheme were maintained.

“Our view is certainly of one of maintaining a private insurance scheme with the two insurers, and encouraging more insurers to come into the marketplace,” Mr Dastlik said. “Based on another jurisdiction, which has had government run insurance for a long time, the premiums charged by that state government authority which handles the insurance are substantially more than have existed in any private sector insurance market in Australia.”

According to ABN Group managing director Dale Alcock, the current private sector-based scheme was working, and has provided stability for the WA building industry.

“There are good controls and checking mechanisms that are now in place with the insurers to verify builders’ financial stability and that is a good thing for the industry and a good thing for our subcontractors and suppliers, let alone the clients,” Mr Alcock said.

“One thing we would be very fearful of is the government bureaucracy determining builders’ capabilities.

“Typically we have enough trouble with government agencies’ approval times and delays, the last thing we’d want to do is have our insurability at the behest of government agencies that are slow in reacting to changes in circumstance.”

JWH Group managing director Julian Walter agreed it would not be in the industry’s best interest for the government to set up a housing indemnity insurance fund in its own right.

“I can’t see much point in the government taking it on because it’s a whole new ball game they’d have to set up,” Mr Walter said.

“You really need free enterprise doing it and you really need competition out there.

“The other fear would be if the government got into it, you’d have a blanket that would sit there covering all builders.

“You’d effectively have the government underwriting every builder, but not even checking the capacity of the builder to perform.

“That is a fear for us because if you’ve got a strong balance sheet, you get a reduced premium, but if you haven’t got a strong balance sheet you get a higher premium.

“We’d obviously be keen on making sure you wouldn’t get fly-by-nighters coming in and getting blanket coverage from the government.”

Signature Custom Homes managing director David Steadman said the government should take a step further and follow the lead of the Tasmanian state government.

“This has been a perennial problem, and the problem is not just finding an insurer but it’s the fact that it’s a legislated requirement,” he said.

“They should just repeal the legislation; it should be an option for a client or a customer to take out insurance privately for the event that their builder goes bankrupt.

“It’s the consumer who benefits from this, and all that the government has done is created this massive bureaucracy for what is essentially a very small claims record. It’s ridiculous.”

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