Victorians will be better protected under a proposed overhaul of domestic building regulations, the State Government says.

Builders’ warranty insurance (BWI) will be broadened beyond last-resort cover and a new regulator will have more power, according to the Domestic Building Consumer Protection Reform Strategy.

Insurers QBE and Calliden are studying the plans, which come as QBE is drastically cutting the number of BWI agreements it has with Victorian brokers.

“We are consolidating our… distribution network to brokers that specialise in this product,” a QBE spokesman said.

“Brokers that do not have an agreement with us for builders’ warranty will still be able to access the product on a wholesale basis through other brokers.”

QBE will not reveal how many agreements it plans to retain, but brokers contacted by insuranceNEWS.com.au say about 16 agents will remain, down from about 100. They say only those with the largest books of builders will keep BWI after August 1.

The Victorian reforms, announced last week, will “dramatically improve protections” under mandatory BWI, because insurance will be triggered whenever a project is incomplete or there is a defect, the Government says.

Domestic builders will no longer need insurance to be registered, but they will need cover to start a project.

Insurance will remain separate from the incoming Victorian Building Authority (VBA) and be offered by the Victorian Managed Insurance Authority on a commercial basis.

The Government is merging three regulators to create the VBA, which will handle builder registration, complaints management and discipline. It will have at least five members, including one with insurance expertise.

The VBA will crack down on builders that go insolvent and trigger their insurance, and then continue trading through related companies.

The ability to “pierce the corporate veil” and undermine insurance arrangements “has been a particularly strong concern for insurers”, the reform strategy says.

Failure to meet insurance requirements will be grounds for disciplinary action.

Insurers will be able to pursue builders to recoup costs, depending on the arrangements in place.

A public consultation on the current system received 53 submissions, with “a general consensus that the framework only provides limited protection for consumers”.

“There was widespread consumer criticism of the narrow scope of the insurance,” the strategy says.

Builders and building associations’ views on insurance arrangements “differed widely”.

Calliden says it will work with the Government. “As the Victorian Government highlights in its reform strategy document, the implementation of these reforms will require substantial changes to legislation and insurance arrangements,” a spokesman said.