South West builders are accusing home indemnity insurance providers of having an unfair monopoly, as soaring premiums and difficulties securing the insurance push some out of the sector.
The mandatory provision of the insurance was introduced by the State Government in 1996, to protect consumers should builders be unable to complete a project.
But since the introduction the number of insurers providing the insurance in WA has dwindled to two with QBE Insurance Australia controlling 95 per cent of the market.
QBE recently announced a 40 per cent hike in its home indemnity premiums.
Dunsborough builder Nick Goode told the Times consumers were incurring additional costs without receiving many benefits.
Mr Goode said the insurance only pays out a total of $100,000 which he said was not much for his clients who were building million-dollar properties.
He also expressed doubts about the insurers’ reasons for increasing premiums and said they had an unreasonable ability to restrict the nature and amount of work a builder could take on.
“They control who gets the insurance and how much they get,” he said.
“If the industry expands again, which it appears to be, the insurers are potentially controlling the expansion.
“There are no checks and balances on the insurance companies by the State Government.”
Master Builders Association WA housing director Gavin Forster said the insurers were becoming a “de facto licensing authority” and the association objected to a private insurer having that power.
Mr Forster said smaller builders were often left at a disadvantage, having to pay higher premiums than project builders.
“(The insurers) argue there is less risk with the bigger builders and the premiums reflect the risk,” he said.
Mr Forster claims this has resulted in a number of small builders leaving the sector, leaving consumers at a disadvantage with fewer choices available.
A Dunsborough builder, who did not wish to be identified, said he had left the residential building sector as a result of difficulties securing insurance.
He warned there would be knockon impacts on local employment should more builders decide to leave, and home owners could expect additional costs.
QBE declined to respond to these criticisms and questions by the Times regarding their decision to increase premiums.
A review of the scheme is being undertaken by the Economic Regulation Authority, with a report expected in June.
The Building Commission said the report would address builders’ concerns about the role of insurers.If a decision was made to continue with the market-based scheme, Commissioner Peter Gow said the lack of competition would have to be addressed.
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