The NSW Government may have to extend the one-year period granted to building practitioners to operate with professional indemnity (PI) covers that come with cladding exclusions, according to the Insurance Council of Australia (ICA).

Surveyors and certifiers in the state must have exemption-free PI policies but the requirement was lifted in July when Landmark Underwriting, then the last provider of exclusion-free cover, pulled out of the market.

The move was aimed at averting a potential collapse in the construction sector, and the NSW Government has set a mid-2020 deadline to remove the interim measure.

Better Regulation Minister Kevin Anderson has previously said he expects the reform actions pledged by the Government to have improved the conditions in the PI market and restored insurers’ confidence.

But ICA does not share his optimism.

“While the Insurance Council and its members are working with Australian governments to realise that expectation, the cladding exclusion may be required beyond the currently prescribed date,” ICA says in a submission to a consultation on proposed reforms of the certification system.

ICA believes broader reforms beyond “ascribing liability to certifiers” would be needed to bring about a long-term fix to the PI problem, which stems from the use of non-compliant cladding and other defective works plaguing the building industry.

As previously reported by insuranceNEWS.com.au, the PI stalemate shows no signs of easing and many building practitioners fear they may have to close unless insurers resume providing condition-free policies.

WA-based surveyor John Massey Group says its PI policy, which has no exclusions, will expire next April and it is concerned it may not be able to find an insurer willing to provide exemption-free cover.

The family-owned business is already paying substantially more for its cover, forking out some $80,000 in annual premiums, up $60,000 from the previous policy.

Huge premiums, massive excesses and broad exclusions are hurting surveyors and ultimately the construction sector, the Australian Institute of Building Surveyors says.

“Without building surveying firms continuing to be able to operate, we are starting to see hundreds of thousands of the projects built throughout Australia over the last ten years being left without any statutory PI insurance,” President Troy Olds told insuranceNEWS.com.au.

ICA maintains insurers will only return when they are convinced the building sector’s problems have been cleaned up.

Giving the insurance industry permanent representation on the Australian Building Codes Board (ABCB) would be a step in the right direction. The ABCB has been tasked with overseeing the 24 suggestions made in the report by Peter Shergold and Bronwyn Weir.

“The insurance industry is seeking action that will restore confidence in the building and construction sector,” ICA spokesman Campbell Fuller told insuranceNEWS.com.au.

“Once the Shergold-Weir recommendations are implemented and the insurance industry is confident the building industry crisis is resolved, individual insurers may reassess their risk appetites and their pricing.”