The Independent Pricing and Regulatory Tribunal NSW (IPART) has released its key recommendations in its review of the home building compensation scheme. The intent of these recommendations is to improve the scheme.
The recommendations aim to:
- Reduce the average value of claims
- Make it easier for new entrants to compete with the NSW Government insurer Icare, and
- Improve Icare’s service.
The review found that whilst NSW has fewer claims compared to other states it also has the highest premiums. The value of the claims made are also significantly higher than in other states. The increased cost of these claims may be due to the fact that NSW allows a higher maximum deposit, with larger progress claims upfront also being allowed.
Another consideration that is likely pushing prices up is the regulated insurance market. This making the situation difficult for new players to take part.
Some of the key recommendations include:
- Fair Trading are better equipped to be able to carry out proactive investigations and audits. This would include low rise residential works, much like the approach being taken by the building commissioner in apartment buildings (RAB Act).
- Fair trading would also collect data in relation to types of complaints, time to resolve, and the value of rectification. These would be reported publicly for transparency.
- KPI or service standards would also be introduced to ensure disputes were resolved within a defined timeline.
- NSW Government to amend the Home Building Act to cap deposits for residential works over $20,000 at 5% (currently 10%).
- Further amendments to the Act including the value of progress payments paid upon completion of specified works. This would reflect the actual cost of completing that work (as a proportion of total costs).
There is also a suite of recommendations to encourage and allow the entry of other insurers into the space to increase competitiveness and choice for builders.
To see the complete review including all recommendations please click below.