2/4/02
Planned changes to home indemnity insurance for builders will not leave homebuyers unprotected.
Consumer Protection Minister John Kobelke said legislative changes were being drafted following the collapse of HIH Insurance and the September 11 terrorist attacks in the United States.
"The collapse of HIH Insurance and the September 11 terrorist attacks have created many problems in the insurance industry," Mr Kobelke said.
"Although the Cabinet has approved changes that will remove the requirement for mandatory home indemnity insurance for developers, builders employed by developers will still require home indemnity insurance to cover consumers for subsequent workmanship issues before they can commence work.
"Consumers who buy 'off the plan' will be protected as they do not become a successor in title until after completion and any deposit paid will be protected by a trust account."
The changes also allow members of an approved mutual fund scheme to undertake residential building work in place of compulsory home indemnity insurance. These mutual schemes will operate alongside and in competition with conventional insurers.
"The Government is pleased to facilitate mutual schemes of this nature where industry participants can act collectively and co-operatively with shared benefits accruing for all," Mr Kobelke said.
He said that since September 11 the re-insurance market had placed restrictions on those companies offering home indemnity insurance in Australia.
New South Wales and Victoria are making significant changes to their home indemnity insurance schemes in line with the arrangements already in place in Western Australia.
Here, the insurance is provided as a last resort in the event of the insolvency, death or disappearance of the builder, rather than as a first resort under a warranty type arrangement.
WA, NSW and Victoria have agreed to exempt multi-unit, high rise developments from the home indemnity insurance scheme.
There will be an exemption provided the builder gives the homeowner a disclosure notice clearly informing of the absence of home indemnity insurance cover in the event the builder becomes insolvent, dies or disappears.
"The changes provide the pre-conditions for a market that will be more competitive and more attractive to new insurers looking to enter the market," the Minister said.
"These and measures already in place - including a $6million rescue package over two years, training seminars for builders and a comprehensive industry survey - show the Gallop Government's responsiveness to the residential building industry and its important role to our community and the economy."
Minister's office: 9222 9211
