Victoria’s much-criticised builders’ warranty insurance will be reformed to provide greater “first resort” protection for consumers.

Currently, residents can only claim through the state-run scheme if a builder dies, disappears or goes bankrupt – forcing many to pursue costly and lengthy legal action to secure rectification of defects.

This “last resort” model has been criticised for more than two decades.

But the state government today announced the introduction of a new and more powerful building regulator, and significant moves towards a first resort model similar to that in Queensland.

The Building & Plumbing Commission will incorporate the Victorian Building Authority (VBA), Domestic Building Dispute Resolution Victoria, and the Domestic Building Insurance (DBI) function of the Victorian Managed Insurance Authority.

Crucially, it will have new powers to issue rectification orders, to allow action against a builder after the occupancy permit is issued.

The DBI scheme will be expanded to respond when a builder has failed to comply with the new rectification order. “This means the builder must no longer be insolvent, have disappeared or died before a claim can be made,” the VBA says.

The current DBI scheme does not apply to buildings with more than three storeys of accommodation. But under the changes, multistorey developers will be required to provide a bond to cover the cost of fixing poor work.

“The new bond will be the first step towards introducing a new 10-year insurance product for apartment buildings, with next steps to be developed in consultation with an industry working group,” the Victorian government said today.

Builders Collective CEO Phil Dwyer, who has been fighting for improvements for many years, told insuranceNEWS.com.au the changes are “a huge step forwards”.

“So far, we are pleased. They need to go further, but they will. This is a big benefit for consumers, and getting much closer to a first resort scheme,” he said.

“It will be wonderful to remove all those civil cases – the cost to individuals is horrific – and to have insurance that works.

"I just can't believe it has taken all these years. We've known the system was broken since 2003."

Consumer Action Law Centre CEO Stephanie Tonkin also welcomed today’s announcement.

“Shifting domestic building insurance to first resort insurance and developer bonds are game-changing reforms,” she said.

“The application of these protections to more consumers, including more apartment owners, is a welcome safety net and will avoid harms we see today.”

The VBA also today released a report – co-authored by building expert Bronwyn Weir – investigating its responses to complaints.

The report highlights the “dreadful experience” and “suffering” of complainants, and recommends changes to the DBI scheme and plumbing insurance.

“It appears that some plumbing insurers may be behaving poorly, undermining the consumer protection intended by the requirement to hold plumbing insurance that meets the ministerial order,” it says.

insuranceNEWS.com.au is not aware of any changes announced today that address the issues raised with plumbing insurance, but VBA CEO Anna Cronin says the authority supports the report’s recommendations.

“I sincerely apologise to those who’ve been let down – we can and will do better,” she said today. “I commissioned this independent report because consumers deserve better – we are learning from these past mistakes and already putting in place changes to become a more effective and trusted regulator.”

The new regulator and powers require legislative changes, and are expected to take effect in the first half of next year.

Ms Weir is also reviewing the NSW builders’ warranty scheme. 

Click here to read more detail on the Victorian changes, and here to read the report on VBA complaints.

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