The Independent Pricing and Regulatory Tribunal (IPART) has released a draft report for the inquiry into home building compensation (HBC) in New South Wales.
The review was commissioned by the NSW state government to complement the work being done to improve building standards and homeowner protections for high-rise apartment complexes following a number of high-profile building faults.
Included in the draft report are 18 draft recommendations the tribunal believes will make the current home building compensation fund more efficient and encourage new HBC providers to enter the market.
In 2018 changes were made to the HBC scheme to allow private insurers to provide cover. However, since opening up not a single insurer has entered the market, leaving iCare the monopoly provider. The long-tail nature of the product combined with the continued losses incurred by iCare due to historically sub-optimal premium pricing has done little to encourage new entrants.
The draft recommendations include a more proactive role for the Department of Fair Trading, additional reporting requirements for iCare, greater powers for SIRA to set premium levels and that amendments to the Home Building Act (1989) be made to allow alternative indemnity providers to offer discretionary products.
Most concerning for the National Insurance Brokers Association (NIBA) is the recommendation that the use of brokers to apply for a certificate of eligibility be made voluntary. This recommendation has the potential to negatively impact many of our members, currently involved in this space. Also concerning is the lack of understanding the report shows as to the nature of the HBC space and the requirements set out by iCare.
NIBA will be providing a submission to the review to ensure that these misconceptions are corrected and that the Tribunal is provided with the appropriate information to make informed recommendations as to the future of the Home Building Compensation Fund (HBCF). NIBA ‘s previous submission highlighted the continuing decrease in the performance of the fund and the raised concerns as to the financial viability of iCare as a nominal insurer.
These concerns have been raised in previous reviews of state insurance both by NIBA and others within the financial services market.