The NSW Government today announced an overhaul of the NSW Home Building Compensation Fund (HBCF) to enable private insurers to enter the market and improve protections for consumers against incomplete and defective work.
HBCF is a mandatory insurance product which builders are required to take out for residential building work over $20,000.
Minister for Innovation and Better Regulation Victor Dominello said that the current scheme has been in significant deficit for many years and is in need of reform.
“This insurance provides a safety net for homeowners in the event a builder cannot complete residential building work or fix defects, due to insolvency, death, disappearance or licence suspension,” he said.
“We are committed to enhancing consumer protection, improving home building standards and reducing the risk of insolvencies through private sector competition and innovation.”
Key elements of the reform include:
· Insurers will be able to offer split cover for defects and non-completion, with homeowners entitled to $340,000 of cover for each product;
· Risk-based pricing will be introduced, so that premiums better reflect a builders’ individual level of risk;
· Premium increases will take effect in early 2017 to ensure the scheme’s sustainability;
· Broker commissions will be phased out, to improve the scheme’s efficiency, eliminating 15 per cent of the current cost of the policy;
· The Government will inject additional funds to return the scheme to surplus.
“NSW is experiencing a residential construction boom and these reforms protect homeowners and empower them to make more informed decisions,” Mr Dominello said.
A bill to reform the HBCF is expected to be introduced to Parliament in the first half of 2017. The reforms follow extensive consultation with industry stakeholders. Further information is available at www.sira.nsw.gov.au.