A parliamentary inquiry into Victoria’s builders’ warranty insurance scheme has concluded that while it needs adjustments, the controversial scheme is nevertheless an effective consumer protection measure.

The report by the seven-person Legislative Council Standing Committee on Finance on Finance and Public Administration, which was released last week, calls for a range of adjustments to enhance the scheme’s transparency and involve more consumer and builder groups, but stops short of calling for radical change.

It calls for “further consideration” of the role played by brokers in the system, saying the insurance broking activities of the major building industry associations “remain a matter of concern for some in the industry”.

The inquiry acknowledges it was stymied early in its investigations by the withdrawal from the builders’ warranty market of private insurers, leading to a Victorian Government decision in July to underwrite the scheme itself, with QBE acting as agent.

“It is too early to determine the impact of the Government’s reforms… but to date [they] have not addressed consumer complaints about the last-resort nature of the scheme,” the report says.

“The committee believes the new scheme should include a higher level of transparency and accountability around underwriting criteria.”

Consumer confusion over the true nature of builders’ warranty insurance – which offers coverage only in the event of the builder dying, disappearing or becoming insolvent – was also considered, with the committee calling on the State Government to “undertake and publish a comprehensive cost/benefit analysis of a mandatory first-resort scheme” similar to the system operated in Queensland.

Also see ANALYSIS