The Victorian Government has downplayed the impact of a report which a builders’ group says shows builders’ warranty insurers are reaping massive profits.

The Builders Collective of Australia (BCA) has used the report from the Victorian Managed Insurance Authority (VMIA) to accuse insurers of corrupting the government-run builders’ warranty insurance (BWI) scheme, claiming figures show it as “an outright scam”.

BCA President Phil Dwyer wants a royal commission to investigate the scheme after he obtained a VMIA report showing $10 billion of building works had been insured in the past 12 months, but only $108,000 had been paid out for three insurance claims.

But Victorian Finance Minister Robert Clark says the VMIA data doesn’t cover a long enough timeframe for a full assessment of the cost and benefits of the program.

“The costs and benefits cannot be validly be judged simply by comparing current premiums with payouts, because many lines of insurance have long tails,” he told insuranceNEWS.com.au.

“The figures released by the VMIA are based on only one year’s operation in providing domestic building insurance, whereas claims can be made against policies for up to six years following building completion or contract termination.”

Mr Dwyer says comparing these figures to the amount of claims paid out proves there needs to be an investigation into where the money has gone “because it’s clear it hasn’t gone to it’s intended purpose to protect consumers”.

He says Vero Insurance, which opted out of the market last year, collected $14.6 million in premium in the 12 months to 30 May and that Calliden and QBE – the only remaining insurers – have collected $5.9 million and $38 million in premiums respectively.

He believes this data coupled with more than 3000 disputes before the Victorian Civil and Administrative Tribunal indicates the system is “corrupt”.

Mr Dwyer admits the building industry has an “unsavoury element”.

“It’s not regulated as it should be and builders are able to run rampant,” he told insuranceNEWS.com.au.

Nevertheless, he believes the BWI scheme should be dumped. “If it means no insurance for a while, that is fine. The insurance industry won’t agree, but there is consumer protection available.”

Mr Clark says the Government is looking the ways the BWI scheme could be improved, “and we will be examining this latest data”.

Spokesmen for QBE and Vero declined to comment. Calliden spokesman Mike Hooton noted his company isn’t part of the Victorian BWI scheme, but added: “Any analysis of the figures for this class of insurance needs to take into consideration the full claims cost over the period of insurance, which in the case of domestic builders’ insurance is for a number of years.”