Builders Warranty Insurance (BWI) and its many name changes over the past 15 years remains exactly the same product that CHOICE describe as the worst insurance in Australia.
No genuine sector of the building industry has any time for it, including the builders who must pay for it to start a project. Consumers see it as protection initially until they have a reason to claim and find its a scam that does more harm than good. Yet our governments retain it. Why?
Like all good scams, there are solid reasons why they exist. This one is no exception, as its reasons for being are based on money and politics.
Trade associations are the only reason the mandatory BWI remains, as it’s their main income stream – money they bring in without having to work for it – and they threaten any government who dares interfere with its being.
Governments, on the other hand, use the trade associations to shore up any situation they concoct, and are able to state they have industry support for their actions. It’s a powerful tool to sideline any criticism or dissent from an industry under siege.
Outcome: the dilapidation of a once proud industry to a virtual third world industry, and consumers are treated with contempt when they find the warranty is an illusion.
This position is confirmed by the release of the task force report into cladding on 1 December, 2017.
“Everyone from builders to suppliers and the regulator need to lift their game,” said Ted Baillieu in the report.
“There has been a culture of non-compliance throughout the building sector,” said John Thwaites.
Further confirmation of a recalcitrant industry in Victoria is demonstrated by the press release issued by the police on 17 November, 2017 stating that 10 men were arrested over the previous week alleging fraud involving fraudulent building licences a circumstance industry has been well aware of for some years.
On 6 December, the Victorian police issued another press release stating they found some 400 building licenses were issued to unfit builders between 2013 and 2015. These Victorian builders are reported to have completed construction work worth tens of millions of dollars, putting consumers in harm’s way by compromising expected safety standards.
The Builders Collective have had grave concerns with the issuing of licences to persons that do not have the skill sets that are required to undertake building. This issue has been raised numerous times at meetings with the VBA, which has stated it is not their issue to deal with.
Richard Wynne, Victoria’s Planning Minister, oversees the building industry and its politics as well as its regulator (the Victorian Building Authority, or VBA). However, Wynne always seems to go missing when it comes to building industry issues. He rarely meets with anyone from the industry, and seems to listen only to his bureaucrats who appear to run the show.
Trade associations are mute on all fundamental building issues other than supporting any government initiatives, shoring up housing figures, and any building or planning announcement the government presents. It gives the impression the wider building industry endorses the subject matter, all is well, and industry is booming.
What an absolute rip off.
Last week, I received a copy of a tax invoice from a NSW builder who applied for BWI via a broker from the Home Building Compensation Fund (HBCF) for the construction of eight two-bedroom apartments, and the invoice totalled $126,061.61.
Stamp duty was $9,954.63 and there was a broker fee of $5,500.
In both Victoria and NSW, the insurance is provided by the respective government insurers – the Victorian Managed Insurance Authority (VMIA) in Victoria and the NSW Self Insurance Corporation (SICorp) in NSW.
This is an insurance product intended to protect building consumers when something goes wrong, but the claim criteria are so narrow, it protects hardly anyone. It’s become known as a scam that trade associations endorse, as do governments, as it lines their pockets at the expense of the building industry and its consumers.
Back in 2008, the Tasmanian Government removed BWI completely as they believed they would be morally corrupt if they retained it. They did not replace it as they believed providing nothing had more value than the BWI product.
For too long, governments have been presenting this consumer protection as a warranty insurance and letting consumers believe they have a builders warranty mandated by government itself. Consumers draw comfort from it, not having any idea of its last resort terms that has such a narrow claims criteria it is worthless in most cases.
In the meantime, consumers look for the cheapest building quote believing they have the warranty insurance policy if something goes wrong. Little do they know it’s only a last resort and virtually worthless.
These are the people who need a genuine warranty insurance rather than an illusion.
The politicians associated with the warranty insurance around the nation should take a leaf from the Tasmanian politicians view of BWI and stop exploiting the industry under the illusion of a consumer warranty scheme.