NSW’s State Insurance Regulatory Authority (SIRA) has released a discussion paper in relation to its proposed measures to improve the home building compensation (HBC) insurance scheme.

SIRA recommends lifting the minimum insurance cover – $340,000 currently – to reflect the increase in the average cost of building a new single dwelling; extending the scheme to cover victims of unlawfully uninsured home construction; and allowing homeowners to claim earlier in the dispute process.

The regulator’s list of 15 proposed reforms also recommends raising the amount of cover for non-completion of works and changing the $20,000 threshold for requiring principal contractors to buy insurance.

Another proposal listed in the paper relates to broader insurance exemptions for high rise buildings. Feedback is sought on whether the exemption for construction of multi-dwelling buildings over three storeys should be expanded so insurance is not required for renovations or alterations to such buildings.

The discussion paper follows a review of the HBC scheme by the Independent Pricing and Regulatory Tribunal, which published its final report in December 2020.

State-owned icare remains the only insurer offering insurance under the scheme, despite efforts to encourage private entrants to participate in it. Private insurers took part in the scheme until June 2010 and since then it has been government-operated and the subject of reforms, premium increases and state support since 2017 to move it to a sustainable financial footing.

One of the questions in the discussion paper relates to improving competition in the scheme so that icare is not the only insurance provider. The question asked whether it is commercially viable for multiple insurers and providers to operate in the scheme.

The scheme is mandatory for principal contractors undertaking works valued in excess of $20,000.

It received 1078 notifications of insured loss and 492 insurance claims in the 2020/21 financial year.

The closing date for submissions is August 16.

Click here for the discussion paper.