Summary of changes - Home Building Compensation Insurance Guidelines

Prudential Guidelines require private insurers to meet APRA standards as well as SIRA’s standards.

Private insurers approved by APRA to carry on insurance business will automatically satisfy SIRA’s prudential requirements.

APRA-authorised insurers are already prudentially regulated by APRA, so it is unnecessary for SIRA to prescribe additional requirements.

Response to recommendation 9 of the IPART report.

Business Plan Guidelines require private insurers to prepare a business plan approved by their Board describing the manner in which HBC business would be conducted. The guidelines also prescribe minimum strategic objectives and require private insurers must include in their business plan:

• targets, timeframes and planned activities to achieve their strategic objectives
• HBC business objectives, mission and vision
• evidence of a strong governance framework
• an operational and organisational risk management plan
• additional documents related to HBC business in addition to those submitted to APRA to meet their requirements.

SIRA’s expectations for business plans will align with APRA’s requirements.

The changes recognise that APRA-authorised insurers are already required to prepare and submit business plans to APRA as per prudential standards under the Insurance Act 1973 of the Commonwealth.

Premium Filing Guidelines specify:

• minimum requirements for contracts of insurance
• how insurers are to present premium filing to SIRA.
• how SIRA will assess filing.

Actuarial sign off stating that the premiums are not excessive or inadequate will be sufficient for SIRA to not reject premiums.

APRA-authorised insurers must publish their premiums on their website.

Response to recommendation 10 of the IPART report.

Eligibility Guidelines prescribe:

• minimum eligibility requirements that must be included in the eligibility model
• the requirement for dispute resolution process and what must be included as a minimum in the process.

APRA-authorised insurers must have an eligibility model with certain minimum parameters, however, not to file and seek approval from SIRA.

The new guidelines also recognise NSW’s adoption of automatic mutual recognition of interstate occupational licences.

Response to recommendation 10 of the IPART report.

Claim Handling Guidelines prescribe:

• minimum claim handling requirements that must be included in the claims  management model including the type of information that the claimant must supply when making a claim
• the requirement for dispute resolution process and what must be included as a minimum in the process.

The new guidelines:

• continue to prescribe minimum requirements for   handling of claims which align with requirements for SICorp
• continue to require APRA-authorised insurers to   file their claims handling model with SIRA which must be accepted by SIRA   before it could be adopted
• prescribes minimum standards for claims handling procedures that must be included in the claims handling model
• remove unnecessary prescription about information that claimant must supply
• require   claims model to be filed by exception instead of annually.
• require APRA authorised insurers to manage claims in accordance with SIRA’s customer service conduct principles
• require APRA-authorised insurers to have systems to check that the rectification work complies with national construction codes standards and will be performed at reasonable market cost
• prescribe a range of standard timeframes that APRA- authorised insurers must meet in handling claims
• prescribe types of forms and information that is to be made public
• that APRA-authorised insurer report to SIRA about its compliance with customer service conduct principles for claims handling.

Set measurable performance standards against which insurers may be held accountable.

Consistency of claims experience for customer of SICorp and APRA-authorised insurers.

Response to government’s commitment to recommendation 13 of IPART report.

Market Practice Guidelines. Currently, there are no market practice guidelines for the home building compensation scheme.

The new guidelines:

• clarify SIRA’s expectations about insurers recording complete data about insured projects and other matters
• set expectations around insurer communication with beneficiaries and contractors
• specify circumstances when a certificate of insurance must be or may be cancelled.

Set standards about APRA-authorised insurers business practices, improve insurer’s accountability and transparency in collecting data and communication with beneficiaries and contractors.

Prudential Guidelines require SICorp to comply with APRA standards as well as SIRA’s standards.

The new guidelines:

• remove the reliance on APRA issued prudential standards
• require SICorp to comply with the standards that are relevant for the State insurer
• require SICorp to provide a valuation report prepared by their actuaries to SIRA.

The changes recognise that SICorp as a NSW government entity is subject to a range of relevant regulatory controls such as reporting obligations to the NSW Auditor General.

Business Plan Guidelines require SICorp to prepare a business plan approved by their Board describing the manner in which HBC business would be conducted. The guidelines also prescribe minimum strategic objectives and require private insurers must include in their business plan:

• targets, timeframes and planned activities to achieve their strategic objectives.
• HBC business objectives, mission and vision
• evidence of a strong governance framework
• an operational and organisational risk management plan
• additional documents related to HBC business in addition to those submitted to APRA to meet their requirements.

The new guidelines:

• remove the requirement for preparation of business plan aligning with APRA’s   requirements
• require SICorp to comply with the standards that are relevant for the State insurer.

The changes recognise that SICorp as a NSW government entity is subject to a range of relevant regulatory controls such as submitting a statement of business intent and a business plan to the Treasury.

Premium Filing Guidelines specify:

• minimum requirements for contracts of insurance
• how insurers are to present premium filing to SIRA
• how SIRA will assess filing.

The new guidelines:

• provide an option to SICorp to apply premium loadings to contractors who fail to declare or do not pay premiums for variations to the contracts
• require SICorp to give its customers a summary of what premiums are spent on
• require SICorp to set a premium cap for insured work exceeding $2 million per dwelling
• remove prescribed postcodes for the purposes of determining premiums in metropolitan and regional areas
• require SICorp to provide the basis for any profit margin it proposes to charge.

Set measurable performance standards against which SICorp may be held accountable.

Response to recommendation 22 of the IPART report.

Support government response to IPART’s recommendation 12.

Eligibility Guidelines prescribe:

• minimum eligibility requirements that must be included in the eligibility model
• the requirement for dispute resolution process and what must be included as a minimum in the process.

The new guidelines recognise NSW’s adoption of automatic mutual recognition for occupational licences and prescribe:

• that SICorp may require contractors to obtain a specific rating from a credit rating agency
• that SICorp may offer discount for the insured work, if the developer achieves a specific credit rating
• the circumstances in which SICorp may suspend or cancel eligibility immediately
• that SICorp report to SIRA about its compliance with customer service conduct principles for eligibility.

Set measurable performance standards against which SICorp may be held accountable.

Response to recommendation 13 and 14 of the IPART report.

Claim Handling Guidelines prescribe:

• minimum claim handling requirements that must be included in the claims management model including the type of information that the claimant must supply when making a claim
• the requirement for dispute resolution process and what must be included as a minimum in the process.

The new guidelines:

• continue to prescribe minimum requirements for handling of claims which align with   requirements for APRA-authorised insurers
• continue to require SICorp to file their claim handling model with SIRA which must be accepted by SIRA before it could be adopted
• prescribes minimum standards for claims handling procedures that must be included in the claims handling model
• remove unnecessary prescription about information that claimants must supply
• require claims model to be filed by exception instead of annually
• require SICorp to manage claims in accordance with SIRA’s customer service conduct principles
• require SICorp to have systems to check that   the rectification work complies with national construction codes standards   and will be performed at reasonable market cost
• prescribe a range of standard timeframes that SICorp must meet in handling claims
• prescribe types of forms and information that is to be made public
• that SICorp report to SIRA about its compliance with customer service conduct principles for claims handling.

Response to recommendation 13 and 14 of the IPART report.

Set measurable performance standards against which insurers may be held accountable.

Consistency of claims experience for customer of SICorp and APRA-authorised insurers.

Market Practice Guidelines, Currently, there are no market practice guidelines for the home building compensation scheme.

The new guidelines:

• clarify SIRA’s expectations about insurers recording complete data about insured projects and other matters
• set expectations around insurer communication with beneficiaries and contractors
• specify circumstances when a certificate of insurance must be or may be cancelled.

Set standards about their business practices, improve insurer’s accountability and transparency in collecting data and communication with beneficiaries and contractors.