Issues around workmanship and building quality need to be addressed as the NSW government reviews its loss-making Home Building Compensation Fund, the Insurance Council of Australia says.

“ICA believes that reducing poor workmanship and building defects from occurring is what is required [to] protect consumers and improve confidence in the building industry,” the council told insuranceNEWS.com.au. “To this extent, ICA has committed to working closely with the NSW building commissioner to improve the quality of building work across the state.”

Like the National Insurance Brokers Association, ICA says it supports the review and improvements to the scheme.

NIBA has urged the government to “consider the successes and challenges of similar schemes” in other states and territories. “By looking outward, we can learn from best practices and develop a system that offers greater protection and peace of mind for homeowners across the state.”

Industry regulation expert Bronwyn Weir is reviewing the scheme and a final report is to be provided to the government by February 24.

The review’s terms of reference include looking at the feasibility and desirability of a multi-insurer market for the program; if the current maximum cover of $340,000 is adequate; and help for consumers who are unlawfully uninsured.

Private insurers pulled out more than a decade ago because of concerns over the fund’s sustainability as losses mounted.

The program was underfunded from July 2010 when it became government-operated, but has been the subject of reforms, premium increases and state support since 2017 to find a sustainable financial footing.

State insurer icare is the only provider under the scheme, which offers last resort financial protection for consumers if their builder is unable to complete work or fix defects because they have become insolvent, died, disappeared or had their licence suspended for failing to comply with a money order made by a court in favour of the homeowner.

icare’s 2022-23 annual report says the scheme recorded a deficit of $56 million and underwriting loss of $162 million, driven by provisions for the Elderton Homes and Oracle Building Corporation insolvencies, general inflation in the construction industry and higher incurred costs, particularly for multi-unit residences.

See the review’s terms of reference here.