The Victorian Government is seeking feedback on ways to improve existing insurance arrangements as part of a wide-ranging review of the state’s troubled building sector.

A “pathway to project-based insurance” is one of the early initiatives that are under consideration, according to the Framework for Reform paper launched last week by the Building Reform Expert Panel.

Other non-insurance initiatives that are part of the panel’s recommendations for stage one of the review include setting up a central building consumer information and support service, registration of building consultants and supporting improvements in industry compliance.

The paper says project-based insurance can provide a single, first resort, insurance instrument that unites the interests and strengthens the accountability of all parties involved in a single building project such as owners, financiers, consultants, designers, engineers, surveyors, builders, other trades.

Project-based insurance models are common in other jurisdictions such as Europe and can include decennial liability or inherent defects insurance.

The Government has been advised to investigate the viability of adopting first resort project-based insurance models for the Victorian building regulatory system.

According to the paper, there are a number of key issues with the current insurance arrangements. These include significant risk for lot owners and owners’ corporations in multi-storey residential strata schemes, exclusion creep in practitioner policies increasing risk exposure for practitioners and consumers, and a lack of information-sharing across stakeholder groups impeding the ability to manage risks.

“It is important to note that insurance settings are influenced by how well the regulatory and professional frameworks are performing,” the paper says.

“The significant changes to the regulatory system proposed for stage one of the reform program will deliver improvements to the insurance settings for building practitioners.

“This is because the more confidence the insurance industry has that risks in the building system are well-managed through strong and effective regulatory frameworks and efficient and effective regulators, the less risk insurers will attach to different practitioners’ insurance policies.”

The paper says there are also opportunities to strengthen the current insurance framework by broadening the potential applications of building insurance products.

In mid-2021 the panel will launch the discussion paper for stage two of its review, which will include options for improving building information, general duties of care, dispute resolution and approval processes.

For stage three, the panel will consider the legislative framework for a new Building Act in 2023.

Closing date for submissions for stage one of the review is May 19.

Click here for the consultation paper.