The NSW Government’s plan to develop a risk-rating tool for new residential buildings has been welcomed by the insurance industry.

The Insurance Council of Australia (ICA) says it will continue to work with the government on the Building Assurance tool, which was announced last Friday.

A spokesman for ICA told insuranceNEWS.com.au the peak body will work in areas such as helping to identify potential collection of information and data that may benefit consumers including setting insurance premium pricing based on individual home builds.

“In discussions with government on the design and implementation of the [tool], it is understood by the ICA that it will collect information on new builds,” the spokesman said.

The government says the tool is designed to bring together product and design certificates of compliance for each building, creating a so-called “digital DNA” that will establish a trustworthy rating for individual residential blocks.

Insurers that access the tool will be able to compare buildings on a like-for-like basis, enabling them to properly price their products.

“We expect this to be a genuinely world-leading piece of work that will help measure the quality and insurability of buildings by identifying which buildings are trustworthy, from measuring compliance with design and construction standards to traceability of materials all the way back to the manufacturer,” Minister for Better Regulation and Innovation Kevin Anderson said.

“The Building Assurance Solution, combined with the requirement for designers and builders to lodge their designs electronically and declare they comply with the building code, will help give insurers confidence to return to the market.”

Insurers have in the last few years introduced strict clauses and restrictions, raised excess and increased premiums sharply in response to the building industry’s quality control issues such as use of non-compliant cladding materials.

As a result, many building practitioners are struggling to secure adequate and affordable professional indemnity policies in NSW and other states.

Honan-owned Bovill Risk & Insurance Consultants (BRIC), a professional indemnity and building insurance specialist broker, has also backed the development of the risk-rating tool.

“The insurance industry welcomes any innovation in the building industry that improves the quality of the building stock in NSW,” BRIC CEO Chris Bovill told insuranceNEWS.com.au.

“We consider the announcement of the collaboration to develop the construction assurance tool to be a positive step in encouraging insurers to re-engage with the market.

“We expect insurers will pay close attention to the impact this tool will have on claims over the 10 years following its implementation and how it improves the risk of defects.”