Hansard 2008-04-10 Building Warranty Insurance

BACKGROUND:
Homeowners currently have a complicated legal process to go through in order to recover on an insurance claim against a builder.
Builders and homeowners have asked for this to be simplified.
Mr Kavanagh asked the Minister for Planning, Mr Madden a question on this issue in Parliament.


HANSARD:
Title: Building industry: warranty insurance
House: COUNCIL
Activity: Questions without Notice
Members: KAVANAGH
Date: 10 April 2008
Page: 1052

Page 1052

Building industry: warranty insurance

Mr KAVANAGH (Western Victoria) -- My question is for the Minister for Planning, Mr Madden. It relates to an issue that I understand is relevant to his own portfolio and also to consumer affairs. It concerns home builders warranty insurance. Victoria's compulsory home building warranty insurance offers extremely limited coverage in a narrow range of circumstances. This insurance can be obtained only if a builder first shows that he or she has sufficient assets or a bank guarantee to cover likely claims. To obtain a payout from the insurer, however, the homeowner must have sued the builder and obtained a favourable judgement but been unable to recover on that judgement against the builder because the builder is dead, has disappeared or is insolvent.

In 2007 the Australian Consumers Association labelled the current mandatory privatised last-resort builders warranty insurance as 'junk insurance'.

Home builders warranty insurance is currently being investigated by a Senate committee. I understand Queensland has a vastly better system than Victoria, and Tasmania has just announced its intention to replace its scheme, which is like Victoria's scheme at the moment. I ask the minister when Victoria will require that builders warranty insurance offer consumers genuine protection on reasonable terms.

Hon. J. M. MADDEN (Minister for Planning) -- I compliment Mr Kavanagh on his question. It is worthy of recognition that it has probably been a long time since I have had a genuine question on either the building or the planning front from the opposition which has been of significance and not about fear and loathing. It is about a significant public issue, and I compliment Mr Kavanagh on the question.

In relation to builders warranty insurance let me say, first of all, that in 95 per cent of domestic building works consumers do not have any disputes and that in the vast majority of cases builders are doing the job they need to do. They do that job particularly well, and only a very small number -- a niche, in a sense -- involve disputes in relation to building works. What we have seen with the changes to insurance issues over

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recent years is a qualification of the desirability for warranty insurance of all sorts, and right across the country it is being redefined and recalibrated.
What is particularly important in this instance is that we have seen two different strategies followed by two different states. New South Wales and Tasmania have headed in slightly different directions. I understand in New South Wales they have sought to strengthen those arrangements and in Tasmania they have sought to remove those arrangements and give clarity to what has been the traditional model of last resort, insurance. In many ways builders warranty insurance is probably best described as insurance of last resort.
Mr Kavanagh's question is a very appropriate one. There is currently work being undertaken within government in relation to these matters to give more clarity and more certainty in terms of what the insurance will and will not do.
I think it is also a worthy intent that consumers be informed of what is and is not their entitlement in relation to this insurance. I suspect that any further work in this space and any further announcements will relate not only to a redefining of what the insurance should or should not be but also and in particular to making sure that consumers are well aware of what that means.
I am currently working on this matter in collaboration with my ministerial colleague the Minister for Consumer Affairs in the other place, and I look forward to making further announcements in the not-too-distant future.

Supplementary question

Mr KAVANAGH (Western Victoria) -- I thank the minister for his answer and the kind comments, but the question came not from the opposition but from the Democratic Labor Party.

On behalf of the government, can the minister assure the consumers of Victoria that the government's policies on this matter will be unaffected by any political donations to any political party?

Hon. J. M. MADDEN (Minister for Planning) -- I can absolutely guarantee Mr Kavanagh that any decisions in relation to this matter will be determined by a full, thorough and frank process on the advice of my department, working in collaboration with my ministerial colleague the Minister for Consumer Affairs in the other place, as are all the matters decided within my portfolio and all the responsibilities that I undertake. They are always determined in the best interests of the broader, general public.