Private insurers will be able to enter the market and protect consumers against incomplete and defective work if a bill to reform the NSW Home Building Compensation Fund (HBCF) is passed in Parliament in 2017.
HBCF is a mandatory insurance product which builders are required to take out for residential building work over $20,000. Under the reform:
- 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 mean premiums will 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 NSW Government will inject additional funds to return the scheme to surplus.
- 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.”
“NSW is experiencing a residential construction boom and these reforms protect home owners and empower them to make more informed decisions,” Mr Dominello said.