The Housing Industry Association (HIA) has defended its controversial stance on home warranty insurance, maintaining the policy works despite being labelled “junk insurance” by builders and consumer advocates.

Earlier this month HIA executives faced the Senate inquiry into home warranty insurance. The HIA is a broker of home warranty insurance with joint venture partner Aon Australia.

HIA Chief Executive of Policy Chris Lamont refused to disclose what was said at the inquiry, citing confidentiality, but told insuranceNEWS.com.au that while there is scope to improve mandatory privatised home warranty insurance, the policy already provides consumers with valuable protection at a competitive price.

Private home warranty cover only protects consumers in the event the builder dies, disappears or becomes insolvent.

Mr Lamont admits that the name of the policy is potentially misleading.

“None of the state systems are perfect,” he said. “We need a better system for resolving building disputes that is fair to builders and consumers.”

Mr Lamont says a completion clause could also be added to policies that would see insurers pay claims immediately upon a builder’s insolvency, avoiding the kind of delays associated with collapsed NSW builder Beechwood Homes.

Such a move would require an amendment to various state building acts and Mr Lamont concedes premiums would probably increase under such an amendment.

But Builders Collective of Australia President Phil Dwyer says that is no solution.

“Most of the attempted claims on home warranty insurance have been for defects so in these cases a completion clause contingent on insolvency would make no difference at all,” he said.

The Senate committee will report its findings in October. Meanwhile the NSW Opposition has announced it will call a fresh state inquiry into home warranty insurance, supported by the Greens and Christian Democrats.