Spate of insolvencies spur SA to rethink building insurance scheme
With three major South Australian construction companies going bust in 2023, the state is looking to make sure its insurance scheme is adequately protecting consumers.
Currently, builders are legally required to take out building indemnity insurance (BII) on behalf of home owners against faulty or incomplete work, and in cases where the builder dies, disappears or becomes insolvent before finishing a project. Consumers can make claims up to five years from the date the building work was completed.
The state government’s South Australian Government Financing Authority underwrites the insurance through reinsurance agreements with QBE Insurance, which currently administers the scheme. The state is entitled to 100 per cent of the premiums collected and is also liable for 100 per cent of the claim losses.
It is currently estimated that the 2023 insolvencies of Qattro Built, Felmeri Homes and 7 Star Constructions – which left hundreds of South Australians unsure about the future of their homes – are expected to cost the government $30.5 million in claims.
A public consultation has been launched by the state treasurer, the minister for consumer and business affairs, Master Builders, and the Housing Industry Association. Consumers can access it via South Australia’s community engagement portal, YourSAy.
Up for discussion is whether existing BII is fit for purpose, ensuring that it offers adequate coverage and covers any potential gaps in protection. The review is also considering issues that have arisen from the recent insolvencies, including whether the maximum insurance payout of $150,000 is adequate.
Examining the scheme in consultation with industry stakeholders is also an attempt by South Australia’s government to address the fact that there’s been an increase in the number of building contracts that don’t have the mandatory BII cover.
In introducing the review, Andrea Michaels, the Minister for Consumer and Business Affairs, addressed how building a home can quickly turn into a nightmare scenario when builders can’t complete the work.
“Building a new home should be a time of excitement, and we’ll be considering what protections should be offered to people to safeguard them throughout the building process as well as what can be done to better support consumers when their builder has failed to comply with the legislation governing BII and in cases of substandard work,” she said.
The state’s Treasurer Stephen Mullighan added that the recent insolvencies have “highlighted the importance of Building Indemnity Insurance”.
“I encourage South Australians to share their views and insights to inform this important work,” Mr Mullighan said.
More from this writer:
-
The often overlooked selling point in homes built after 2010
-
Examining the market impact of SA’s stamp duty shake-up
-
Are Qld’s record low vacancy rates a ‘new normal’?
-
Why Sydney values dropped over October
-
Victoria's rental reforms refresh concerns of investor exodus
-
No-fault evictions out as Victoria reveals new rental reforms
-
‘A bad tax’: Housing Minister says stamp duty should be axed