Home warranty scheme commences

Changes to the NSW Home Warranty Insurance Scheme came into effect on July 1.

Tender specifications for operating the scheme, underwriting procedures and arrangements for premium pricing have now been finalised.

Home warranty insurance provides cover to consumers of up to $300,000 in circumstances where their builder is no longer capable or willing to complete a project or rectify defective work.

The new model will be underwritten by the Government and fully funded by premiums. It will be managed by Treasury through the Self Insurance Corporation and 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.

Cover for building projects already issued by insurers will remain in force for the duration of the policy, allowing consumers to make claims where necessary.

Vero, QBE and Calliden have agreed to provide eligibility to existing and new builders up to 30 June 2010 in line with their current underwriting criteria.

It is proposed that builders who currently have eligibility with one of the three existing insurers will be transferred to the Government scheme automatically, with no changes to their existing eligibility profile. Builders will be notified in writing of the transfer.

The exception is builders who have provided security to their insurer. These builders will be contacted separately and given information about transferring to the Government insurer. Builders will not be asked to provide bank guarantees under the new scheme.

Builders who have obtained eligibility through a ‘managed’ builder program will have ongoing eligibility subject to them continuing to use the services of an approved ‘managed’ builder program provider.

Brokers will continue to process applications for certificates of insurance, which should keep disruption to a minimum.

A builder who requires eligibility will still need to lodge an application through a broker. These applications will be assessed by a fund agent on behalf of the Government.

The Government also intends to offer a ‘managed’ builder program, both to new builders and to existing builders who have had difficulty getting eligibility because of low equity in their business. Under the program, builders would have their contracts and costings for a job reviewed, and inspections would be carried out for quality assurance.

Builders who are currently unable get cover insurance should contact NSW Fair Trading on 13 32 20.

To read Peter Freeman's summary of changes click here:

Peter Freeman's summary of HWI changes.