A Victorian report into builders’ warranty insurance has revealed most claims on the product are rejected.

Of 1363 formal claims received by insurers between 2002 and 2008, just 273 were accepted, confirming a lack of consumer awareness about the product.

A report by the state’s Essential Services Commission reveals that insurers have collected between $6.27 million and $7.5 million in premium each quarter since December 2005.

Since 2002 when the last resort builders’ warranty insurance scheme began, insurers have paid just $10.2 million in total claims in Victoria.

The Victorian Government this month launched a review into builders’ warranty insurance, which one insurer says is the 56^th such review of the product.

It is a legal requirement in most states except Queensland and Tasmania. Claims are contingent on builders’ death, disappearance or insolvency. The NSW Government recently added the loss of a builder’s licence as a fourth claims trigger. 

Vero spokesman Sue Repanellis challenged the report’s findings when contacted by insuranceNEWS.com.au.

“I’m not sure how they got those figures,” she said. “Our claims to premium ratio is closer to 85%.”

Calliden Group Executive Marketing and Distribution Mike Hooton says the long-tail nature of the policy means claims relating to previous years could still be received.

“We believe the current structure provides an equitable level of cover at an affordable level of premium,” he told insuranceNEWS.com.au.

Builders Collective of Australia President Phil Dwyer has called for the scheme to be “dumped immediately”.

Also see ANALYSIS.