THE state government is facing a choice between providing builders’ warranty insurance in its own right or scrapping the requirement, following the withdrawal of Australia’s largest home indemnity insurer from the local market.
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THE state government is facing a choice between providing builders’ warranty insurance in its own right or scrapping the requirement, following the withdrawal of Australia’s largest home indemnity insurer from the local market.
The government will meet with housing industry groups, including the Master Builders Association, this week to determine its options after Vero Insurance announced it would withdraw from the builders’ warranty insurance market from June 30.
In WA, builders warranty insurance is a mandatory requirement on all building work valued at more than $20,000 under the Home Building Contracts Act.
Master Builders Association WA director Michael McLean told WA Business News the state government had to take urgent action to prevent a home building crisis.
“One option is to scrap home indemnity insurance altogether, but that’s a political decision I don’t think it will be prepared to make, even though some builders think that’s a reasonable option,” Mr McLean said.
“Another option would be to explore the continuation of private insurance, but I don’t think that’s going to be viable because the market in WA is not big enough to entice insurers to stay.
“A more likely outcome for the government to consider is limiting home indemnity insurance to the scope of the Home Building Contracts Act, which is contracts between $20,000 and $500,000.
“Most of the punters would fall into that category; we would say maybe 85 per cent of the market, and leave the rest of the industry to have a voluntary scheme.”
Vero’s decision to withdraw follows the NSW government’s announcement in November last year to underwrite and capitalise insurance under its home warranty insurance scheme from July 1.
The only remaining providers in WA are QBE and Calliden.
QBE holds about 30 per cent of market share in WA, with Calliden holding about 5 per cent.
Vero told WA Business News a review of its operations had determined it was no longer viable for the company to continue providing builders’ warranty insurance.
Vero did, however, express interest to the NSW government in being a participant in the NSW scheme as an administrator/claims manager.
The NSW government’s decision to enter the builders warranty sector follows a 2008 Tasmanian state government reform to leave the purchasing of builders’ warranty insurance at the discretion of the consumer.
In Queensland, residential builders’ warranty is provided by the Building Services Authority, a Queensland state government related body.
Residential builders’ warranty in Victoria, South Australia and the Australian Capital Territory is compulsory for all works in excess of $12,000.
There is currently no requirement for builders’ warranty insurance in the Northern Territory.