Builders Collective Australia

Published in the Sydney Morning Herald and the AGE
Wednesday 26th of August 2
Section: Money
 
 
Home warranty insurance queried.  "Everyone would be better off without builders' warranty insurance" 
By Catharine Munro   
While it is compulsory in NSW and Victoria, there is a growing school of thought that says everyone would be better off without builders' warranty insurance.
Tasmania became the first state in Australia to make the insurance voluntary last month.
"This product would have to be rating number one in the world as being the worst bad-faith insurance product. There's no doubt about that," says the president of the Builders Collective of Australia, Phil Dwyer.
Industry watchers are suggesting another inquiry into the product will be announced this month. This one would be conducted by the Victorian Government and, according to Dwyer, would bring the tally up to 37 since 1997.
The problem with the insurance product in NSW and Victoria is that it is compulsory for any builder who signs a residential building contract worth more than $12,000. Without it, builders don't get a licence.
Premiums, which are passed on to the consumer, were $796 for the median price of $265,433 for a new house in Sydney in 2007, the Housing Industry Association (HIA) told a Senate inquiry last year. In Melbourne, it was $661 for the median price of $232,649.
However, in these states it is only insurance of last resort, covering customers in case builders become insolvent, disappear or die.
Consumers must pursue their builder in the courts before they even attempt to make a claim, which must be made within six years.
Another problem in Victoria is that dispute resolution is compulsory, unlike in NSW, making it difficult to bring unwilling builders to the table to negotiate.
Many builders, meanwhile, resent the fact they are required to provide bank guarantees to their insurer.
But one builders' lobby group is not completely opposed to the system.
The HIA, which shares ownership with Aon insurance company of the brokerage HIA Insurance Services, along with the company's revenue of $22 million last year, told a Senate inquiry the product is "certainly not worthless" and acted as a safety net.
It is opposed to introducing a government-backed scheme.
In Queensland, home builders' warranty insurance is state-backed and compulsory. Claims can be made for non-completion or defects. But the HIA believes it would be expensive and unmanageable for other states to follow suit.