SIRA targets home building insurance gaps in NSW
SIRA targets home building insurance gaps in NSW | Insurance Business Australia
Property
SIRA targets home building insurance gaps in NSW
Respected industry leader to spearhead review
Property
By
Roxanne Libatique
The State Insurance Regulatory Authority (SIRA) has launched a review of the Home Building Compensation Fund (HBCF) as part of a commitment from the New South Wales (NSW) government aimed at enhancing protections for homeowners involved in residential construction and renovation projects.
The review seeks to address the adequacy and effectiveness of the HBCF, which provides insurance coverage to homeowners when building work is incomplete or defective, and the contractor is unable to rectify the situation due to insolvency, death, disappearance, or license suspension.
Home Building Compensation Fund coverage
The HBCF currently offers up to $340,000 in coverage, an amount that has remained unchanged for more than a decade, despite a significant rise in construction costs during that period.
The NSW government has raised concerns that this outdated coverage level may no longer provide sufficient protection, leaving consumers vulnerable to financial loss.
Her mandate includes evaluating several critical issues, such as:
the high rate of insolvencies in the building sector;
the level of consumer awareness regarding their rights;
builder compliance with existing regulations;
the adequacy of current insurance coverage; and
the overall performance of the HBCF.
“This review marks a significant step forward for families investing in their homes in NSW, ensuring the fund remains a robust safeguard,” she said.
She expressed optimism that the review’s findings would lead to meaningful changes that improve outcomes for those affected by issues like contractor insolvency.
Compliance concerns among construction businesses in NSW
The review also reflects growing concerns about compliance among construction businesses in the state.
Over the last five years, builders have received more than 1,000 Penalty Infringement Notices for various violations related to home building regulations.
This audit, conducted in collaboration with the NSW Building Commission and the icare Home Building Compensation Fund, found that these firms had not obtained the necessary insurance, which could expose homeowners to financial risks, particularly if a builder becomes insolvent.
NSW law requires construction companies to obtain HBC insurance for any residential project valued above $20,000, although there are certain exemptions. Despite this requirement, some contracts have proceeded without the mandated insurance, potentially leaving homeowners unprotected.
In response to these findings, SIRA issued warnings to the nine firms involved but has indicated that further action, including fines or referrals to the NSW Building Commission, could follow. It also plans to expand its audit to include 100 additional construction firms to ensure compliance with HBC insurance regulations.
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