The state-owned Victorian Managed Insurance Authority (VMIA) has received 4849 domestic building insurance (DBI) claims since March 1 last year from property owners whose builders have gone into insolvency, including the collapse of Melbourne-based Porter Davis.

The “unprecedented” claims have contributed to VMIA suffering a bigger-than-expected loss in the last financial year. It recorded an operating deficit of $115.4 million, a shortfall of $61.7 million compared to the budgeted loss of $53.7 million.

“This year was challenging from a claims perspective,” VMIA said in its 2022/23 annual report.

“The variance to budget was mainly driven by higher-than-expected claims incurred across all portfolios, in particular claims for the October 2022 floods in our Property portfolio and the Porter Davis Homes insolvency in our DBI portfolio.”

VMIA, the main provider of builders’ warranty insurance in Victoria, says the Porter Davis failure is the largest domestic builder insolvency in the state’s history. Liquidators were called in after the builder collapsed at the end of March last year.

The state insurer has made more than 1600 offers worth over $116 million to Porter Davis customers who are covered under its DBI scheme, which provides protection if a building project cannot be completed or has defective works that cannot be rectified because the builder has died or become insolvent.

The offers are separate from the one-off relief scheme set up by the Victorian Government for the group of Porter Davis customers without DBI after the builder failed to acquire the mandatory insurance, breaching Victorian laws.

VMIA CEO Andrew Davies says the insurer’s priority is to get homeowners into their homes as quickly as possible while supporting them to use a reputable builder.

“This has been a difficult and stressful time for Porter Davis Homes customers, particularly for those whose claims are more complex and involve a detailed process to assess their specific needs and circumstances,” he said.

“VMIA provides homeowners with the option of a builder who can complete their home in line with the specifications they originally agreed with Porter Davis, at a price that minimises homeowners’ out-of-pocket costs.”

The state insurer says the 4849 claims received to date relate to Porter Davis customers, homeowners affected by other insolvent builders and a combination of claims for incomplete homes and claims for finished homes with defects.

Of the 4849 claims processed, VMIA says 1359 claims are still awaiting settlement. A DBI claim is defined as “settled” only when a homeowner has accepted VMIA’s assessment of their claim and signed a release and authority form.

There are about 213 claims from Porter Davis customers that are yet to be settled and more than half of these were lodged in the last 30 days.

“VMIA has the financial capacity to pay all DBI claims we have received,” the insurer says in an email to insuranceNEWS.com.au.

Some homeowners have been unsatisfied with the way VMIA has handled their claims, including the building quotes they have been provided to finish their homes. They have called on the Victorian Ombudsman to investigate how the quotes are arrived at and the Victorian opposition has backed the move.

But VMIA says the insurer works with a group of “reputable builders” who have the capacity and experience to complete the homes abandoned by Porter Davis and other insolvent builders.

“These builders’ quotes are often lower than other builders’ because they have big supply chain networks and a strong pipeline of work,” Mr Davies said.

“When a homeowner signs a contract with a rectifying builder, they are signing a fixed-price contract. Under Victorian law, the builder cannot then revise the price unless there is a variation to the scope of work.”