New home warranty insurance scheme starts 1 July 2010

The move follows an announcement by the Government in November 2009 that it would introduce major structural reforms to the Home Warranty Insurance Scheme in New South Wales to safeguard building industry jobs and better protect home owners.

The change involves the Government underwriting and capitalising the Home Warranty Insurance Scheme, which will be fully funded by premiums.

The decision was made following the withdrawing insurers CGU and Lumley in November and subsequently Vero from the market.

The only insurers currently providing insurance are QBE, and Calliden.

According to the Fair Trading Minister, Virginia Judge, the new model will be:

·         underwritten and capitalised by the Government

·         funded by home warranty insurance premiums

·         managed by Treasury through the Self Insurance Corporation

·         operated by the private sector (by way of a competitive tender) for the provision of services in relation to the issue of project certificates, collection of premium and claims handling.

Underwriting criteria will be determined by the Government acting on the advice of the Home Warranty Insurance Scheme Board and with building industry input.

Advice to Government from the Home Warranty insurance Scheme Board indicated that a substantial contraction of the market has occurred following the Global Financial Crisis.

The announcements in mid 2009 by Lumley General and CGU Insurance Limited of their exit from the market is evidence of the tightening of the market. The advice to the Government is that this contraction and current market conditions will likely lead to further insurers exiting the market in the near future. Vero has subsequently announced its intention to also leave the market on 30 June 2010.

Evidence to the Scheme Board and Government is that an increasing number of builders in NSW are unable to obtain cover.

The Government is acting decisively to protect jobs and give peace of mind to families.

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