The review is to be conducted by SA Treasurer Stephen Mullighan and Minister for Consumer and Business Affairs Andrea Michaels. Photo: File.
South Australian citizens are being invited to speak about building indemnity insurance (BII) as part of the State Government’s review to ensure support for home builders in the long term.
South Australia (SA) legally requires builders to take out BII on behalf of homeowners when they sign a major contract so that in the event of any builder dying, disappearing, becoming insolvent, or failing to deliver the work as expected, the homeowner is protected for up to five years post completion.
In collaboration with the Master Builders Association and Housing Industry Association, the government will conduct the review to determine if the existing BII cover is appropriate.
Along with looking at what’s covered, the minimum thresholds, and gaps in consumer protection, there will be particular focus paid to recent insolvencies that have prompted questions around the sufficiency of the $150,000 insurance limit.
Treasurer Stephen Mullighan said recent insolvencies had highlighted the importance of BII and he encouraged South Australians to share their views and insights to inform the important work.
“Building a home is a huge investment. We need to ensure the best possible protections are in place – both for families and the industry,” he said.
In the 2023-24 period, estimated total claims from the insolvencies of Qattro Built, Felmeri Homes and 7 Star Constructions are expected to total $30.5 million, including those payments made and still in progress.
And overall, there’s been an increase in the number of building contracts without mandatory BII cover.
Currently QBE Insurance (Australia) Limited administer the scheme through reinsurance agreements, underwriting BII via the South Australian Government Financing Authority (SAFA).
Of the premiums collected, the state is entitled to 100 per cent but also liable for all of the claim losses that have been provided through an SAFA insurance fund.
For the next six weeks a consultation paper and survey will be available to individuals and stakeholders on yourSAy, through which the government hopes to attain guidance on simplifying and strengthening the scheme.
One round of interviews with builders, insurance brokers and homeowners has been accomplished so far, but those interested in participating in the second round can register on the same site.
Minister for Consumer and Business Affairs Andrea Michaels said they wanted to ensure South Australians had the strongest level of protection possible when building a home.
“Building a new home should be a time of excitement and we’ll be considering what protections should be offered to people to safeguard them throughout the building process as well as what can be done to better support consumers when their builder has failed to comply with the legislation governing BII and in cases of substandard work,” Ms Michaels said.
The public consultation process will close on 25 March and the government expects to receive the final recommendations in June.
