The National Insurance Brokers Association (NIBA) has criticised proposed reforms to NSW’s state-run builders’ warranty insurance scheme.

The Home Building Compensation Fund is losing money – reporting losses of $33 million in 2014 and $62 million in 2013 – and NSW Fair Trading released a discussion paper in December outlining options for reform.

Suggested models include reducing administration costs and raising premiums;
reducing coverage; combining reduced scheme coverage and raised premiums; moving to a voluntary insurance scheme;
or combining a voluntary and mandatory scheme.

In its submission on the paper, NIBA says the scheme is in a dire financial position and the reforms outlined are unlikely to make it viable. “The discussion paper does not identify or analyse the key drivers of claims costs, or the causes for deterioration in the financial performance of the scheme in recent years,” it says.

The Insurance Council of Australia’s submission says the scheme clearly needs significant reform.

But it argues premiums should be determined through risk pricing, and reducing defective building work should be a priority.

It adds a voluntary model is inappropriate and suggests certain insurer-funded building work could be made exempt.

See ANALYSIS