Topic: News

Industry groups concerned about home builder insurance red tape

  • Nathan Mawby
  • Herald Sun Real Estate
  • April 03, 2014 3:03PM

VICTORIA’S government run domestic building insurance underwriter has come under fire for tying up the states builders with red tape and a lack of transparency.

The state’s peak housing body, the Housing Industry Association of Victoria, has raised concerns over rising levels of red tape being issued by the only provider of insurance for home builders in the state, the Victorian Managed Insurance Authority.

Meanwhile the Builders Collective of Australia noted some builders were being delayed for up to six months as they awaited assessment for insurance eligibility, and raised questions over the transparency of decisions.

HIA Victorian executive director Gil King said the industry group had concerns with rising amounts of insurance red tape being applied to builders.

“It’s another layer of bureaucratic red tape that builders have to wade through,” Mr King said.

“Every year, the administrative burden has another hurdle to jump.”

Phil Dwyer, national president of the Builders Collective of Australia, said he was aware of builders facing lengthy delays for insurance approvals.

“The assessment of builders in some cases seems to be taking a long, long time,” Mr Dwyer said.

Builder Peter Onley, who has built more than 2000 homes in almost 30 years, began applying for Domestic Building Insurance for jobs slated to begin in July last year. He made 11 further applications for insurance, without receiving a yes or no response, up to October when a lack of cashflow, in part caused by a client withholding more than $200,000 in payments, forced him into administration.

Months later the VMIA informed Mr Onley he was a “moral hazard” and was to be refused insurance.

Prior to the rejection Mr Onley paid down debts and restructured his business to make it more viable, but is now concerned he will have to let his five staff go.

“We haven’t been able to start any new business since July 17, 2013,” Mr Onley said.

“All they (VMIA) have issued so far is a proposal to deny.

“I have been red taped out, and I had never had an insurance claim against me previously.”

Mr Onley said he had no intention of leaving clients in the lurch and was requesting a review by VMIA.

Peter Ryan, chief executive of the VMIA, said the underwriter aimed to turn around insurance applications in 25 days.

“The vast majority of insurance applications are processed extremely quickly,” Mr Ryan said.

“For example, the target for new builders seeking insurance with VMIA with turnovers up to $10 million per annum is 25 days. Shorter targets apply for builders with smaller turnover limits.

“Longer time frames can apply where builders provide incomplete or inaccurate information, or the builder’s circumstances require a more detailed financial assessment.”

He said industry bodies had been supportive of the VMIA and its role in providing domestic building insurance.

Mr Dwyer, and Rob Berry a partner at BCR Partners which helps at risk builders make their businesses more viable, are now calling on builders who believe they have been disadvantaged by insurance decisions to alert them to the grievances as they push to have the system reviewed by the state’s Auditor General.

Mr Berry, who acted as the administrator for Mr Onley, said the builder had secured the consent of his creditors to continue trading prior to the VMIA’s rejection.

“We have worked with 18 distressed builders and about 250-odd projects, and in the commercial space they are fine — because there’s no VMIA,” Mr Berry said.

“We approach the creditors and try to get a consensus for the company to trade on, doing a restructure of the business, and then the VMIA say ‘no, we are not comfortable with this’ on the basis of the outcomes offered to the creditors,” Mr Berry said.

Mr Dwyer said in any other industry ASIC would allow a business the chance to continue working with administrators.

“The regulators say he can have another chance by entering into an agreement with his creditors,” Mr Dwyer said.

Mr King indicated he believed delays to building projects caused by the VMIA would be the exception to the rule.

BCR Partners and the Builders Collective of Australia intend to present builders’ concerns to the Auditor General’s office which will make a decision on whether to pursue a proposed investigation into domestic building insurance by June this year.

Netlink: bcrpartners.com.au



Bankrupt builders

It is the brand new neighbourhood fast becoming a ghetto – before most occupants have even moved in. Report by Jackie Quist.


We are embarrassed & ashamed

Builders pay for all compliance and consumer protection for our industry but we are continually embarrassed and ashamed of the Last Resort Warranty Insurance that is forced on our industry by government legislation.

Our consumers suffer in the most grotesque manner when we fail but government continue to fiddle and do nothing to fix the consumer protection and provide what we want which is real consumer protection.

An example of how we fail is shown in this Today Tonight segment at this link:


Last Resort Builders Warranty Fiasco continues

INSURANCE NEWS.com publishes the industry views on Governments and their lack of ability to listen to our industry and provide real consumer protection

Builder groups attack WA warranty reforms
30 September 2013

Proposed builders’ warranty insurance (BWI) reforms in WA will not solve market problems, according to trade groups.

The Builders Collective says the plan will increase the cost of cover, while Master Builders WA has questioned claims the plan will attract more insurers to the market.

The state’s only remaining BWI insurers, QBE and Calliden, are considering an Economic Regulation Authority report that recommends they continue providing construction-only cover, underwritten by the WA Government, while industry bodies offer voluntary warranty cover for six years post-construction.

The authority says this could bring more insurers to the market.

Many insurers have withdrawn from BWI in recent years. QBE says it is assessing its position in the state – where it provides 90% of cover – but is committed to working with the WA Building Commission to find a long-term solution.

Calliden Group Executive Agency Services Mike Hooton says the insurer will confirm its position after reviewing the report.

Builders Collective President Phil Dwyer says the recommendations will bring a large increase in construction insurance costs, plus the additional charge from the post-construction cover.

“If all those who are taking so much out of our industry were removed, we could provide first-resort [cover] at far less money than we pay now and our industry would not be continually embarrassed,” he told insuranceNEWS.com.au.

Master Builders director Michael McLean says insurers have already quit BWI markets in other states, so “it is questionable whether any would continue to operate in a small market such as WA, even with a lower risk exposure”.

His group has told the Economic Regulation Authority it has no appetite for offering warranty cover, and it prefers Tasmania’s model of voluntary BWI.

The NT is also reviewing its BWI, including whether the mandatory system introduced in January is needed.

The Master Builders Association NT operates a fund as the sole source of cover.



Letter from the NT Government

Dear stakeholder
RE: Residential Building Cover (RBC) Package Review 2013

The Minister for Lands, Planning, and the Environment has announced an independent review into the Residential Building Cover Package. A copy of the Review’s Term of Reference is attached for your information.

The Review Panel will as part of its review be testing the RBC package against past builder failures in the Northern Territory to quantify the extent that the current RBC package (including the cover provided by the fidelity fund scheme) would have benefited consumers.

The Panel is also inviting comment from stakeholders to assist in identifying if there are any potential modifications to the RBC package which will reduce the red tape burden on the building industry whilst maintaining consumer protection.

An Issues Paper has been prepared to help generate discussion and is available from www.nt.gov.au/rbc.

You are encouraged to provide your written comments by 26 August 2013, which may be forwarded by email to rbi@nt.gov.au or by mail to RBC Review Panel, PO Box 1680 DARWIN NT 0801.

Yours sincerely
Residential Building Cover Review Panel
12 August 2013


Darwin Builder Meeting

The builders meeting held on the 11th July attracted both builders and consumers, and was successful considering the blanket advertising blitz undertaken by the Master Builders.

Whichever way the Fidelity fund is presented nothing alters the fact that it is a LAST RESORT product with a narrow claims criteria of only four triggers that will not deliver to our clients/consumers a responsible consumer protection regime.

Remember builders pay for every cent of compliance and consumer protection and we want a say in what is provided.

We want a regime that will protect our consumers, manage our industry, and deliver the intended benefit and not embarrass our Government and our industry.

Government have a responsibility to us to deliver an appropriate regime on our behalf and not abrogate their responsibility to the expensive secretive private sector last resort scheme that will not deliver as “CHOICE” has stated in the past, and are now currently reviewing at our request.


Alice Springs Builders Have Their Say

Thursday June 6 saw virtually all the Alice Springs builders come together over concerns bought on by the introduction of the MBA Fidelity Fund by the previous Government as a kneejerk reaction to the Carey Builders failure.

This Last Resort scheme in the southern States has had devastating impacts on both builders and consumers with unimaginable outcomes, and has been maintained under an illusion as the regulatory oversight was removed by the instigators at the outset.

The nations consumer advocate ‘Choice’ in their written assesment of Last Resort refer to it as Junk policies/certificates not worth the paper they are  written on, and making a mockery of consumer protection while the Productivity Commission state its been a running sore since inception.

(more…)