Building a home is a monumental endeavour, marked by excitement, anticipation, and sometimes, unforeseen challenges. To safeguard South Australian homebuilders, the state government is embarking on a thorough review of Building Indemnity Insurance (BII). This initiative aims to ensure that South Australians are adequately protected throughout the home-building journey.
Under current regulations, builders are obligated to secure BII on behalf of homeowners when signing major building contracts. This insurance serves as a safety net, shielding homeowners from potential financial burdens in cases where the builder passes away, vanishes, or becomes insolvent before completing the project. Additionally, it provides coverage for defective work on completed homes for up to five years post-completion.
In collaboration with the Master Builders Association and Housing Industry Association, the Treasurer and Minister for Consumer and Business Affairs are spearheading this review. Together, they seek to enhance protection for homebuilders and provide sustainable support for local builders in the long term.
“Building a home is a huge investment. We need to ensure the best possible protections are in place – both for families and the industry,” Treasurer Stephen Mullighan said.
“Recent insolvencies have highlighted the importance of Building Indemnity Insurance.
“I encourage South Australians to share their views and insights to inform this important work.”
The review entails a comprehensive evaluation of existing BII coverage to ascertain its effectiveness. Factors such as the scope of coverage, minimum thresholds, and any existing gaps in consumer protection are under scrutiny. Additionally, the adequacy of the current insurance limit of $150,000 is being reassessed, particularly in light of recent insolvencies.
A consultation paper and survey have been made available on yourSAy, inviting individuals and stakeholders to contribute their experiences and insights. Through this collaborative effort, the aim is to streamline and fortify the BII scheme.
“We want to ensure South Australians have the strongest level of protection possible when building a home,” Minister for Consumer and Business Affairs Andrea Michaels said.
“Building a new home should be a time of excitement and we’ll be considering what protections should be offered to people to safeguard them throughout the building process as well as what can be done to better support consumers when their builder has failed to comply with the legislation governing BII and in cases of substandard work.
“This is an opportunity for South Australians to tell us their experiences and contribute to our review and I urge them to do so.”
Initial interviews with builders, insurance brokers, and homeowners have already taken place, providing valuable input into the review process. Homeowners and industry professionals are encouraged to participate in the forthcoming round of interviews and stakeholder workshops via yourSAy.
Recent insolvencies, including those of Qattro Built, Felmeri Homes, and 7 Star Constructions, have underscored the importance of robust insurance coverage. Estimated total claims from these insolvencies for 2023-24 are projected to reach $30.5 million. Moreover, there has been a concerning rise in the number of building contracts lacking mandatory BII coverage, emphasizing the urgency of the review.
Building Indemnity Insurance in South Australia is underwritten by SAFA, with reinsurance agreements in place with QBE Insurance (Australia) Limited. The state bears full responsibility for claim losses, facilitated through a SAFA insurance fund, while also receiving 100% of the premiums collected.
The public consultation period is open until March 25, 2024, with final recommendations slated for presentation to the government in June. This collaborative endeavour underscores the commitment of the South Australian government to prioritise the safety and security of homebuilders across the state.