NSW Parliament passed legislation today that will overhaul the Home Building Compensation (HBC) Scheme, allowing competition into the market, ensuring the scheme’s financial sustainability and maintaining high levels of consumer protection.
HBC is a mandatory insurance product which builders are required to take out for residential building work over $20,000. It currently 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.
Minister for Finance, Services and Property Victor Dominello said the changes would enable private insurers to enter the market and improve protections for consumers against incomplete and defective work.
“The current scheme has been in significant deficit for many years and is in need of serious reform,” he said.
“We are delivering on our promise to deliver a modern fit for purpose scheme. The future scheme will be risk based, self-funding, sustainable, innovative and competitive."
Key elements of the reform include:
- Providers 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 will be introduced, so that premiums better reflect a builders’ individual level of risk;
- Clarifies that HBC providers may offer products that exceed the minimum standards prescribed under the Act, and which need not be limited to cases where a builder is dead, disappeared or insolvent; and
- Enables the State Insurance Regulatory Authority (SIRA) to use data analytics and enhanced information sharing between building regulators to detect and manage builder insolvency.
Private providers will be able to enter the market next year, for the first time since 2010. SIRA will be responsible for licensing and regulating HBC providers.
The legislation followed extensive consultation with industry stakeholders.
Further information is available at www.sira.nsw.gov.au