The Victorian Auditor General’s message could not be clearer: the building industry is in severe and critical crisis.
The Victoria’s Consumer Protection Framework for Building Construction investigation found that Builders Warranty is too expensive, and it’s ineffective as well. This supports the “CHOICE” position of 2008, when they stated Builders Warranty Insurance (BWI) was a set of junk policies making a mockery of consumer protection.
In this, the 54th investigation/review of the controversial Builders Warranty Insurance (BWI), the Auditor General found the framework was ineffective, too expensive, widely misunderstood, overly complex, and did not deliver in the area of registration, compliance and consumer protection.
Builders and consumers have known for the past 13 years that their system was badly broken, but the builders' cries have continually fallen on deaf ears.
Trade Associations are supposed to be the builders’ voice to governments in terms of policy, regulation, compliance, and they should also put forward views for the betterment of the overall industry. Disappointingly, this has not been the case, as has been exposed by the Auditor Generals findings.
The Victorian Managed Insurance Authority (VMIA) even failed to adopt a business plan to deliver the BWI and, according to the Auditor General, has wasted some $21 million that could have been available for its intended purpose: consumer protection.
VMIA/government is the only provider of this warranty insurance, so why are brokers needed? Furthermore, the biggest warranty insurance brokers/agents are the two industry trade associations. What a conflict of interest.
This public policy regime of consumer protection was introduced on 1st July 2002 by Royal SunAlliance and their broker who stated, “Today’s announcement is not only good for builders, its also great news for new home buyers and renovators.”
How could anyone make such a statement when they knew the facts?
Sadly this regime manages the industry from start to finish and to work, the builder must first obtain insurance eligibility from the insurer who determines:
- If he can renew his registration
- His level of annual turnover
- The size of a project he can build
- Pay the price for a warranty policy on behalf of his client
The consumer, for whom this regime is ostensibly designed, for must pay for a warranty policy, which he believes protects him from a builder’s failure and accordingly draws comfort from that fact, and may take the cheapest quote. Sadly he often finds too late that his protection is very limited and not often available. When it is available, it is so protracted it may take many years for a resolution, and average payouts are only $33,000.
The only avenue to resolve a building dispute in Victoria is through VCAT and the cost is totally prohibitive, and never satisfying for either party
Builders were sold down the river though the introduction of this regime. Thousands of builders either lost or were at risk of losing their livelihood when it was introduced and while MBA were sympathetic at the initial outset, the HIA defended the scheme and told governments that the builders that were complaining were not responsible builders.
The building consumers were told this scheme was good for them. Little did they know that the truth was far different.
The Liberals in 2013 stated their proposed reforms were a fresh start. The reform they were referring to was to completely remove the current system and replace it with a regime that would have seen both the consumers and the builders of the state rejoice in what would have been a fair and just system that would have worked.
It appears, however, that both the Housing Industry Association and the Master Builders Association worked to stall those reforms, and the Liberals subsequently lost the 2014 election.
In light of the Auditor General's Report, the new State Government now has the opportunity and needs to demonstrate strength, remove any conflicted influence, and deliver a workable system of consumer protection and industry management.
The first step should be to throw out the regime completely!
The way forward is simple, and consumer advocates agree:
- Introduce a one-stop shop regime with robust dispute and resolution supported by a government-run Statuary Fund overseen by an independent board to support consumers as the need arises
- Remove the current boards, and bring all responsibilities under the one stop shop principle administered by the VBA
- Early intervention with disputes resolved by an adjudicator that issues binding orders
No industry requires 54 investigations to demonstrate their total failure, but over the course of many investigations and studies, it was shown that the current regime failed in the following ways:
- The cost of the investigations in monetary terms alone is a disgrace
- The social cost was also staggering
- It had devastating impacts on building families
- Builders' families were also hard-hit
- There was a shocking waste of millions of dollars
- An industry was taken well and truly into disrepute through this regime
In short, it was a waste of $21 million, did not result in proper licensing, regulation, compliance or consumer protection. This is a powerful indictment of the government.
It is time for the bureaucracy and the two trade associations to move out of the way and enable a genuine regime of consumer protection and industry management to be put in place for the roughly 100,000 consumers who enter into building contracts each year, not to mention the 20,000 or so Victorian builders who want a system based on equality, justice, and fairness.
That is the Australian way! There can be no excuses this time!