The NSW government plans to revamp its mandatory builders’ warranty insurance scheme, announcing today that industry regulation expert Bronwyn Weir is reviewing the program.

Ms Weir will examine issues including whether the Home Building Compensation Fund is operating effectively; if the current cover amount is adequate; and high rates of insolvencies in the building industry. Other issues such as help for consumers who are unlawfully uninsured and consumer awareness and builder compliance will also form part of the review.

Over the past five years, more than 1000 penalty notices have been issued and 188 builders have been prosecuted for failing to hold the correct insurance.

The NSW government says “important elements” of the scheme have not been updated in more than a decade.

“The fund’s maximum coverage was set more than 10 years ago at $340,000, but building costs have grown 60% over that time, making it appropriate to consider whether this should be updated,” the government said. “Adjusting the coverage amount will strengthen the fund’s effectiveness and support housing supply by ensuring financial protections keep pace with rising costs, facilitating continued industry stability and growth.”

Customer Service Minister Jihad Dib says Ms Weir is an industry leader with the right skills and experience to lead the review.

“I am looking for grounded, pragmatic suggestions about how government and industry can, together, improve the operation of the Home Building Compensation scheme,” he said. “Now that I have taken carriage of the State Insurance Regulatory Authority, I look forward to seeing the outcomes of this review progress and delivering a better scheme for people building a home or renovating.”

The authority oversees the scheme, and its website says the review’s terms of reference include examining the feasibility and desirability of a multi-insurer market for the program.

The final report is to be provided to the minister by February 24 next year.

At present, state insurer icare is the only provider under the scheme after private insurers left the market more than a decade ago. It distributes the cover through an approved list of brokers.

The scheme is aimed at protecting homeowners if their builder is unable to complete work or fix defects because they have become insolvent, died, disappeared or had their licence suspended for failing to comply with a money order made by a court in favour of the homeowner.

Cover is mandatory for residential building projects of more than $20,000 and it is the duty of builders to acquire the insurance before starting work or requesting payment from clients.

insuranceNEWS.com.au has asked the Insurance Council of Australia and National Insurance Brokers Association to comment on the review.

See the terms of reference here.