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National Review of Home Builders
Warranty Insurance and Consumer Protection

Appendix 4: Summary of HBWI in Australia and other countries

Part A: Australia

All Australian jurisdictions have mandatory home builders warranty insurance. Western Australia excludes certain remote regions of the state from mandatory insurance.

Queensland is the only jurisdiction where insurance is confined to a State-owned agency (Queensland Building Services Authority) that also performs builders licensing and consumer protection functions. The Northern Territory also only has one insurer, the government-owned Territory Insurance Office, but the market is not closed to private providers.

The other states and the ACT rely on private insurers operating within a statutory framework. HIA Insurance Services (underwritten by Royal Sun Alliance) and Dexta (underwritten by Allianz and now by the governments of NSW and Victoria in their own jurisdictions) dominate these markets thanks to special relationships with the two building industry associations (HIAIS with the HIA and Dexta with the MBA). Reward operates on its own through brokers.

Both private and government insurance underwriters offload a large proportion of their liabilities on international reinsures such as Swiss Re, Employers Re, Gerling Re, Hanover Re, Munich Re, Cologne Re, Global Re and SCOR Re. Swiss Re, the largest re-insurer of Australian home builders warranty insurance policies, decided recently to withdraw from writing new business.

There are significant variations in home builder licensing, contracting, warrants, insurance and dispute resolution requirements between different jurisdictions, the most important of which are summarised in the following tables.

The tables incorporate recent changes to HBWI in NSW and Victoria as well as changes announced, but not necessarily yet implemented, in Western Australia and South Australia.

Australia

Table 1.1: Statutory home building requirements and other features

	NSW	Vic	Qld	SA	WA	Tas	ACT	NT
Builders must warrant their work	Yes	Yes	Yes	Yes	Yes	Yes	Yes	No
Builders must enter into formal building contracts in addition to warranting their work	Yes	Yes	Yes	Yes	Yes	No	No	No
Building contracts must be worded in `Plain English'	No	No	Yes	Yes	No	No	Not applicable	Not applicable
Builders warranty insurance covered by legislation	Yes, Home Building Act 1989	Yes, Building Act 1993 and Domestic Contracts Act 1995	Yes, Building Services Authority Act 1991	Yes, Building Contracts Act 1995	Yes, Home Building Contracts Act 1991	Yes, Housing Indemnity Act 1992 Building Act 2000 still to be proclaimed	Yes, Building Act 1972	Yes, Building Act 1993
Private insurers permitted	Yes	Yes	No	Yes	Yes	Yes	Yes	Yes
Private insurers must be approved by government in addition to APRA	Yes	No	Not applicable, only BSA permitted	No	Yes	No	Yes	No
Government fully or partly guarantees or underwrites insurance	Yes, but only for BSC and HIH claims, claims in excess of $10 million for a single builder and insurance for high-rise units	Yes, but only for HGF and HIH claims, and claims in excess of $10 million for a single builder	No, Formal guarantees or re-insurance by Government	Yes, but only for HIH claims and claims in excess of $10 million for a single builder	Yes, but only for HIH claims and claims in excess of $10 million for a single builder	Yes, but only for HIH claims	Yes, but only for HIH claims	Yes, in respect to TIO

Table 1.1: Statutory home building requirements and other features (continued)

	NSW	Vic	Qld	SA	WA	Tas	ACT	NT
Current insurance providers ranked by share of market	Dexta, HIAIS, and Reward	Dexta, HIAIS and Reward	BSA	HIAIS	HIAIS and Reward	HIAIS and Reward	HIAIS	TIO
Insurers must submit regular statistical reports to government	Yes, but not provided in a standard format	No	Yes, but only through annual report of BSA	No	No	No	Yes, but do not comply	No
Professional builders must have insurance before commencing building work	Yes, (checked by local council)	Yes, except for spec homes	Yes	Yes	Yes, (checked by local council)	Yes	Yes, Except for spec homes	Yes
Agency for administering insurance legislation	Fair Trading	Infrastructure	Housing	Consumer and Business Affairs	Builders' Registration Board	Consumer Affairs and Fair Trading	Planning and Land Mgt	Infrastructure, Planning and Environment
Private certifiers permitted to approve buildings	Yes	Yes	Yes	Yes	No, Certification done by Local Councils	Yes	Yes	Yes
Government audits private certifiers	No	Yes	Yes	No	Not applicable	No	Yes	Yes

Table 1.2: Statutory home builders warranty insurance requirements

NSW

Vic

Qld

Tas

ACT

Scope of insured work

Dwellings, single trade work, swimming pools and spas, kit home packages

Dwellings, extensions, renovations and all detached structures

Dwellings, out-buildings, extensions, and renovations with `roofs'

Dwellings and all detached structures within curtilege of house

Dwellings, extensions and renovations

Dwellings, excluding detached garages, out-buildings

Dwellings (including certain kinds of detached garages), but not other detached buildings or structures

Dwellings and out-buildings

Types of policies permitted

Job specific and annual

Job specific

Job specific and annual

Job specific

No restrictions

Minimum value of work requiring insurance

$12,000

$3,300

$12,000

$5,000

No floor

Minimum statutory insurance cover

(Note: In practice insurers treat this as maximum sum payable)

$200,000
inclusive of legal costs

$200,000 inclusive of legal costs

$200,000

$80,000

$100,000

$50,000

$85,000

No ceiling

Maximum insurance payout for non-completion claims

20 per cent of contract value

$200,000

$80,000

$100,000

$50,000

$85,000

No ceiling

Maximum deposit payable to builder

10 per cent for contracts under $20,000 and

5 per cent for contracts over $20,000

10 per cent of contract value up to maximum deposit of $20,000

10 per cent for contracts under $20,000 and 5 per cent for contracts over $20,000

$1,000 of labour costs plus oncosts

6.5 per cent of contract value up to maximum deposit of $13,000

3 per cent of contract value

$10,000

No ceiling

Table 1.2: Statutory home builders warranty insurance requirements (continued)

NSW

Vic

Qld

Tas

ACT

Maximum period of warranty insurance cover

6 years for structural defects and 2 years for non-structural defects from completion date

6.5 years from contract date

5 years from completion date

6 years from completion date

5 years from certificate of occupancy date

10 years from certificate of occupancy date

Building contract must state fixed price

Yes,

and/or warning

Yes

Yes,

with special conditions for `cost plus' contracts

Not applicable

Building work must be in accordance with contract standards

Yes

Not applicable

Owner builders exempted from insurance

Yes,