The SA Government expects to start consultation soon on ways to strengthen the state’s builders’ warranty insurance (BWI) scheme after the collapse of construction firms exposed cracks in the current setup. 

Treasurer Stephen Mullighan and Consumer and Business Services Minister Andrea Michaels are leading a joint review into the Building Indemnity Insurance (BII) scheme. 

The review, which began earlier this year, is considering a range of issues including protections for consumers and the insurance framework for builders. 

An integral part of the review is to ensure that stakeholders’ experiences and perspectives on building indemnity insurance and the related consumer protections are appropriately captured and considered. 

The review is also considering issues that have arisen from recent insolvencies including the $30 million collapse of Felmeri Group in May. The government was forced to step in after it was discovered the builder failed to acquire BII for several customers before its collapse. 

The government is working with the Housing Industry Association and Master Builders Association to develop the scope and design of the public and stakeholder consultation process.    

“Consultation activities will be tailored to the different stakeholder groups, and will include the release of a public consultation paper,” the government says in a statement. 

“We anticipate the public consultation process will commence in October.” 

Mr Mullighan says while the number of SA builders that have gone into administration is comparatively small when compared to other jurisdictions, the impacts on affected individual consumers nonetheless may be substantial. 

“Reviewing the way Builders Indemnity Insurance is provided will help ensure people have a robust safety net in place when building a home,” he said. 

Ms Michaels says issues to be considered from a consumer protection perspective include what protections should be afforded to consumers at various stages of the build process, what can be done to better support consumers when their builder has failed to comply with the legislation governing BII, and in cases of substandard work. 

In SA contractors must acquire BII for residential building work valued at $12,000 or more and the policy must be taken out in the name of the owner/customer before commencing work or accepting payment. 

BII protects against financial losses of up to a maximum amount of $80,000 for policies issued on or before June 30 2017 and $150,000 for policies issued on or after July 1 2017. 

The SA Government has underwritten the BII scheme since 2013 after private insurers pulled out. At present QBE is the only BII provider through an ongoing reinsurance agreement with the government.