A submission by the National Insurance Brokers Association (NIBA) to the Tasmanian Government’s Home Warranty Insurance consultation supports reintroduction of the scheme, alongside complementary reforms to reduce risk and ensure its long-term viability.

CEO Philip Kewin says NIBA looks forward to details of the scheme, including the proposed pricing model and underwriting criteria.

Home warranty insurance was abolished in Tasmania in 2008 and the collapse of Tasmanian Constructions and Inside Out Constructions has prompted the state government to reintroduce the scheme, which would use a “last resort” model consistent with most Australian jurisdictions.

It would provide cover for incomplete or defective building work in the event that a builder dies, disappears or becomes insolvent.

"With average property prices in Tasmania at an all-time high, it is more important than ever that Tasmanians are protected if something goes wrong,” Mr Kewin said.

However, he says without strong building codes and reforms to prevent “illegal phoenixing” – where a new company is created to continue the business of an existing company that has been deliberately liquidated to avoid liabilities – the long-term viability of the scheme is likely to be jeopardised.

NIBA’s submission says an assumption Tasmanians who wished to take out home builder insurance would do so on a voluntary basis by sourcing a suitable product from the private market “has proven to be false with homeowners unable to protect themselves and their largest investment against incomplete or defective building works”.

A last resort scheme was the “most effective way to balance the benefit to homeowners with the economic impact premiums have on property prices,” it said, adding that “first-resort” schemes such as Queensland’s would “significantly increase the cost associated with building or renovating a home”.

NSW and Victoria previously operated first resort schemes which were abandoned due to a lack of availability.

The submission reveals the maximum amount homeowners are able to claim under the home warranty scheme in their state ranges from 9% of the median capital city house price in the ACT to 37% in Victoria. The maximum claim value in most states is more than 25% of the median house price in the respective states’ capital city.

Under the proposed Tasmanian model, the maximum claim amount represents 27% of the median house price in Hobart, which NIBA said was broadly consistent with the maximum claim value of other schemes and was likely to provide adequate cover to the majority of affected homeowners.

The ACT is reviewing its Home Warranty Insurance system to ensure it remains fit for purpose. It has the lowest maximum claim value despite having the second-highest median property value in the country.