Brokers must be on high alert regarding disclosure of building defects and how insurers view risk, given 72% of surveyed homeowners have reported one or more defects, Strata Community Insurance MD Paul Keating warns.

For homes built after 2000, the proportion is even higher, at 85%.

Mr Keating told insuranceNEWS.com.au the problem of defective buildings is so bad that insurers “almost need to assume they aren’t being build to code”.

He says the most common problem is water damage through defects such as burst pipes, and unsecured roofing and eaves.

“Some buildings [in Queensland] have no waterproofing at all because there is no supervision,” he said. “Do you bring back the old clerk of works?”

The current project management system leaves huge gaps, he tells insuranceNEWS.com.au.

“Brokers need to pay close attention to disclosure of defects and other building quality issues that will increasingly impact how an insurer will view a risk, and… their attitude to responding to claims.

“Known defects are a standard exclusion on most policies – some have blanket defect exclusions whether owners knew of the existence or not. Brokers need to avoid these on behalf of their clients.”

Mr Keating says insurers will use exclusions, deductibles and/or premium increases to reduce risk of claims from problem areas of construction.

“Ultimately, they have to get a return on the capital they put out against strata risks.

“Failing that, we continue to add poor-quality buildings into the market, with massive economic consequences for future owners.”

Mr Keating says the Senate Economics Committee’s recent recommendations on cladding go a long way to addressing the overall quality issue.

“Some of those recommendations could apply to improving building quality, full stop.”

However, even if building quality improves today, it will take a generation to fix current problems, he says.