Attacks on two Sydney insurance companies by an influential business journalist have left Dexta MD Ashraf Kamha bemused. Dexta and Royal & SunAlliance have been accused by Channel 9 business editor Michael Pascoe of holding up a residential building boom in New South Wales by playing hardball over builders’ warranty applications.

Mr Pascoe made the allegation on the Business Sunday program, and repeated it on the Today show yesterday morning. But Mr Kamha says the Pascoe allegations are “rubbish”.

Less than 3% of applications for builders’ warranty cover are being knocked back by his company, Mr Kamha said. “That includes builders who are just asked to supply more information.”

So why the verbal brickbats? Mr Pascoe hasn’t given the two insurers’ side of things – yet – but he has succeeded in raising some seemingly startling allegations. Mr Kamha agreed that some builders are being asked to provide deeds of indemnity – literally guaranteeing to make their personal assets available in the event of a business failure – before they are sold cover. But he said he can’t see why Mr Pascoe has a problem with this, and there is no sinister intent on the part of the insurers.

“We’ve all heard stories of builders with up to $4-5 million in projects just walking away from their obligations, then starting up a while later under a new company name,” he said. “Where the company requiring cover doesn’t have sufficient assets in the business, we require them to sign a deed of indemnity to guarantee they will use their personal assets to meet their obligations. It’s not a new practice.”

About 50% of builders – most of them small operators – run companies without any tangible assets, Mr Kamha said. “If we didn’t demand a deed of arrangement, the builder would effectively have no vested interest in the project. What is to stop the builder just walking away and leaving the consumer with a claim? It used to happen a lot.” If builders have sufficient assets in the business, there is no need for a deed of indemnity. 

Mr Kamha said the BW legislation was framed purely to protect consumers. With the loss of HIH from the market, the environment has changed. “HIH had a more general BW policy, and a big segment of small builders were underwritten with very few restrictions. We won’t do that.”

Mr Kamha said the State Government is “well aware” of the situation. “We have regular meetings with the relevant authorities.”