The broking peak body has urged NSW to look to other states and territories as it explores ways to improve its builders’ warranty insurance scheme.

“We encourage the government to consider the successes and challenges of similar schemes ... by looking outward, we can learn from best practices and develop a system that offers greater protection and peace of mind for homeowners across the state,” the National Insurance Brokers Association said.

As reported this week, industry regulation expert Bronwyn Weir is reviewing the Home Building Compensation Fund.

The review will examine the effectiveness of the scheme; if the current cover amount is adequate; high rates of insolvencies in the building industry; the feasibility and desirability of a multi-insurer market for the program; and help for consumers who are unlawfully uninsured.

A final report is to be provided to the government by February 24.

State insurer icare is the only provider under the scheme, distributing cover through an approved list of brokers. Private insurers pulled out more than 10 years ago amid concerns over the fund’s sustainability.

The scheme was underfunded from July 2010 when it became government-operated, but has been the subject of reforms, premium increases and state support since 2017 to find a sustainable financial footing.

icare’s 2022-23 annual report says the scheme recorded a deficit of $56 million and underwriting loss of $162 million, driven by provisions for the Elderton Homes and Oracle Building Corporation insolvencies, general inflation in the construction industry and higher incurred costs, particularly for multi-unit residences.

The scheme offers last-resort protection for homeowners if their builder is unable to complete work or fix defects because they have become insolvent, died, disappeared or had their licence suspended for failing to comply with a money order made by a court in favour of the homeowner. 

Cover is mandatory for residential building projects of more than $20,000 and it is the duty of builders to acquire the insurance before starting work or requesting payment from clients.

NIBA says it is committed to working closely with the government throughout the review process.

“Recent events have underscored the importance of ensuring that our home warranty insurance system is both resilient and responsive to the needs of homeowners,” CEO Richard Klipin said.

See the review’s terms of reference here.