When Will We Learn When it Comes to Builders Warranty Insurance? 8

Tuesday, March 15th, 2016
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Builders Warranty Insurance
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That an important area of the building industry can be treated with such contempt over such a long period of time is shocking.

Our industry pays tens of millions of dollars every year to deliver consumer protection to our clients in the event something goes wrong, but only a few ever benefit while most who have a problem are put on a merry-go-round of loss and despair.

Yet again we now have to endure another series of reviews/enquiries in virtually all jurisdictions to appear to be rectifying the broken and fundamentally flawed consumer protection known as Builders Warranty Insurance (BWI) or its multitude of name changes to give the impression of a new product that in fact remains the same.

The continual round of reviews to satisfy the critics and or government agencies now number some 56 in 14 years, again at a further cost of tens of millions of dollars to be added to the overall consumer protection bill.

The Government of Tasmania has been the only jurisdiction that has been brave enough to stand up to those who support these current arrangements, and they removed the Last Resort BWI back in 2008 to the benefit of its consumers and the building industry.

There is no builders warranty insurance in Tasmania. Its wider industry has benefited and consumers rely on their research in their builder selection, which results in builders who misbehave losing the opportunity to find clients.

In the event of a dispute in Tasmania, Consumer Affairs run a dispute and resolution program for the building industry.

The Builders Collective congratulate the Tasmanian Government for their fortitude in the face of adversity, and their foresight in understanding the Last Resort BWI consumer protection regime was benefiting only those who were marketing the product, and most of the intended recipients were unable to access what they thought was their consumer protection.

So now we have reviews in nearly all states and territories. Victoria is leading the charge with some fiddling of the existing regime and the promise of some further change in the future in the hope this will silence the critics, including the Auditor General’s Office, who have been extremely critical of the Building Commission/Victorian Building Authority in the three investigations they have undertaken to date.

New South Wales’ consultation period of their review has just closed, and they have put forward a number of proposed solutions for consideration which include fiddling with the same regime and/or consideration for a voluntary scheme and or a part mandatory/voluntary process. It appears, however, that the basis will be the same fundamentally flawed scheme.

The Northern Territory had the right idea with the current (Cureton Review), which recommended a raft of changes, including the removal of the Last Resort BWI in its entirety. Unfortunately, political forces have been at work, and it appears these proposed reforms may not see the light of day.

The Western Australia review is a strange one, and they are currently soliciting the services of private insurers to re-enter their market and provide the Last Resort Product. One can be assured it will be on the insurers’ terms, which will be extremely costly and deliver little. Back to square one!

When will our governments stand up for and on behalf of the building industry and its consumers instead of fiddling to try and satisfy those who market this fundamentally flawed product and then pretend the fiddle will satisfy all?

This recent proposed fiddle in Victoria will do nothing other than ensure our industry remains a mess, as the proposed changes are too limited and nothing short of a holistic regime as discussed with all governments will deliver appropriate industry management and consumer protection.

It appears governments know better, yet nothing they have done over the last 14 years has even remotely worked, and in fact has only stalled for more time amidst the scathing reports delivered by the government agencies who have oversight over this disgraceful product that continues to takes our industry further into disrepute.

The escalation of severe criticism by government agencies that have this oversight over the past few years can no longer be avoided as the spotlight of shame is focused squarely on the governments and those it has chosen to administer the consumer protection regime on behalf of the wider building industry.

The building industry is suffering on many fronts, but there is no equal to the Last Resort consumer protection regime that has languished for the past 14 years with no serious attempt to remove it, only tokenism to create a further illusion.

Governments must step up to the plate, take charge and resolve this matter, as the industry can no longer be exploited by bad government policy.

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  1. David Chandler

    Phil you are right to keep on about this abject policy failure that only continues because of the advocacy power of the interests who want to sustain the lowest common denominator builders in construction. This approach follows that of Australian Standards which focus on minimum compliance levels which are then eroded by the deemed to comply certification options I see being exploited by an industry prepared to serve a compromised deal to its customers
    One would imagine that the powerful advocates of the status quo can see the train wreck fast approaching. The consumer is currently in the inevitable position of having to pay for useless home owner warranty insurance, the cost of trying to get redress before those trying to avoid accountability either disappear, die or become insolvent. Then the public pays when builders fail. To add salt to the wound a 2% developer defects fund in NSW will allow developers a get out of jail free card before the consumer and taxpayer picks up the balance of cost involved. There are some pretty simple solutions. The first starts with builders/developers having to offer their customers a choice of an insurance/performance risk wrap that is worth the paper it is written on. That would see the 'best practice performers' being rewarded for a low claims experience and the lesser performers paying premiums that accord with their capabilities and risk. Modern Construction will be about 'best practice' not shielding the weakest players of 'traditional Construction'. As Australia's housing ratio increasingly shifts to multi-unit and away from traditional detached housing there is a once off opportunity to recalibrate. Policy makers need to understand the changing dynamics of the industry.

  2. Les Williams

    Not that long ago one of the heavy hitters in the NT administration replied when asked that those who provided political donations got to the front of the queue when seeking consultations with the administration. We have already read the response by a NT "peak industry body" to the Cureton review. We have watered down legislation in NSW in terms of the Retention Trust scheme that is an insult to peoples intelligence, the original intent of BCIPA 2004 in QLD destroyed in 2014 and 2 important industry institutions abolished in 2.7 years, a 1996 commission of inquiry report shredded after the commissioner had his livelihood threatened and weakened consumer legislation in Victoria. We have cosy little relationships between the building regulators and the peak industry groups and the same groups presenting themselves as industry experts and "advisors" and the use of non compliant materials that compromise public safety. Until the seeking and gaining of preferential treatment is fully revealed and stopped the industry will simply get worse. Pressure needs to be maintained on the NT government . We are currently providing band aids to fix what should be major surgery. The Australian construction industry supposedly worth $300b to the economy needs a complete independent rethink devoid of any input from the abovementioned groups. We need a federal approach and a recognition that the dynamics of the industry has changed from that of 40 years ago with a group of eminent people, industry experts like David Chandler to lead the way. That should be the approach that we take leading up to the next federal election. We need minimum federal construction industry legislation that is in the public interest not vested interest.

  3. Peter

    Great work Phil, & well done Tasmania!
    All of the remaining States need to adopt the Tasmanian system.
    No more reviews please.

  4. Steve Lewenhoff

    On the money Phil. Unfortunately with the current construction economic climate its going to get much worse before it gets better, (if ever). This Industry is currently suffering from desperate & unscrupulos contractors undertaking inferior & simply dangerous work outcomes (with bogus or fraudulent engineering certification) just to win work. In our discipline of foundation/piling/stabilisation & structural engineering etc., the effects are often not realised until well after construction is finished. Settlement can result in significant construction defects (cracking) & these contractors are flyby-nighters & what with bogus documentation there will be nobody around to hold to account for the fraudulent actions, further deepening the quagmire for unsuspecting owners & builders… In WA we have never before experienced what is currently going on.

  5. beverley-jane

    Thanks to Phil and an old school building inspector, we received the policy maximum, which by no means covered the extensive, dangerous and non compliant rectification our slick salesman 'builder' of '30 years plus' left us with!
    Even if you are one of the rare few who win the battle with the insurer, it is highly unlikely your insurance will meet your rectification costs! Then you begin the whole process again where you are forced to choose another builder to fix the mess of the first REGISTERED builder. Constant financial fodder to a pack of wolves.
    At the time of quoting on our project, unbeknown to us, our 'builder' was actually in VCAT, for the second time, in regard to successful warranty claims against his defective work! How is it that both the insurers and regulators allowed this destructive individual ongoing insurance cover and registration to continue wreaking havoc on other vulnerable families!
    He walked away with unpaid refunds and never had to pay a cent towards rectification.
    Advice to submit our own defect lists and inspector's reports to the insurers immediately issues became evident, starting from occupation, prevented the insurer claiming they had not been notified within the limited time periods. Insisting on acknowledgment of these defect notifications, proved critical when we came to claim.
    It appears that this massive wrecking ball called the construction industry, brings in too much revenue to be sincerely challenged. For the sake of a dollar today, families lives are ruined and their financial security often destroyed by officials, biased and ineffective regulations.
    Is it any wonder the hard working people of this country have lost faith in their political leaders?

  6. Lesley Crouch

    Hear hear Phil ! Government is letting us all down by not making a concerted effort in cleaning up the building industry and
    the Building Warranty Insurance fiasco.

  7. Bruce Haines

    Being from Qld we have had the Home Warranty Insurance Scheme for quite some time, run by QBCC (formally BSA). From my experience the scheme was reasonably effectively run when it was BSA, but the changes implemented by the Newman government which resulted in the change to QBCC has just caused unnecessary complications and delays in the processing of claims.
    So if HWI is abolished, what happens in cases where builders enter into bankruptcy or carry or out grossly defective work that they don't have the finances to cover costs for repairs? Surely creating an environment where this occurs to consumers is not the answer.

  8. Anne Paten

    First, it is not the 'industry' spending money. All the money to fund the mega trillion dollar building industry is paid for by consumers. Second, the BWI scam of compulsory donations to insurers and brokers is forced on consumers by 'law' and paid for by consumers. Third, owners directly fund the 'non-regulators' who do no regulating. And fourth Phil, there is no 'consumer protection' and we are not talking about "in the event something goes wrong" – more than 250,000 times it goes wrong in Victoria every year – this is not an uncommon event. The statistics are 5 years out of date and yet in 2011 the number of owners damaged was 40% of those in the market as building consumers that year.

    The solution is not to have NO insurance. At the very least, in an industry that is lawless and where disputes are planned to be the inevitable consequence, owners who have zero consumer protection at least need genuine insurance. This means one that they pay for and can claim on – and actually be paid something. And an amount that would rectify and complete the owner's building!

    As we all know, this will never happen. Who would insure in an unregulated, out-of-control industry?

    Why Phil do you continue to argue for no BWI instead of proper insurance that all victims can claim?

    As for owners doing their homework on builders and finding someone decent, you know that this is impossible. No matter how hard one might try, the truth on 'builders' is hidden – by the builders, the VBA, BPB and of course by CAV and VCAT as the havens for burying builders' disasters.

    A voluntary scheme – but what insurance company would offer same?

    No Government will even try to protect consumers – this has underpinned policy for decades.