Insurers desert home warranty

Two insurers have jumped from the NSW home warranty ship in the space of two weeks.

First, Lumley General announced it will be stepping back from the Home Owner's Warranty Insurance progressively from July 2009, and will exit the market by January 1, 2010.

Next came the news on July 13 that CGU will also be withdrawing from the Home Warranty Insurance Scheme on November 30, 2009.

Lumley says home warranty represents only two percent of its premium income, and is not considered a core business for the insurer. They will continue to offer up to six months of eligibility for existing customers.

"All policy holders as at 31 December 2009 will remain covered for the duration of their policy," says Lumley CEO Vivek Bhatia. "And we will maintain a claims handling service to manage any claims that may arise in future years from the policies we have underwritten."

SPASA NSW has recommended that all builders who currently hold Lumley eligibility should act now to obtain eligibility with one or more of the remaining approved insurers before the October 31, 2009.

Meanwhile, CGU has advised that it will cease writing new home warranty insurance policies for builders with current eligibility with CGU from December 1, 2009; and cease granting new eligibilities to builders immediately. Builders with current eligibility with CGU will be required to find another insurer before December 1, 2009.

All existing policy holders with CGU will remain covered, in the event of a claim, for the duration of the period for policies underwritten by CGU.

SPASA NSW says that the withdrawal of two major insurers within two weeks is of considerable concern for the building industry and SPASA will be writing to the NSW Government in order for them to look closely at the continued operation of the privatised scheme.

The remaining insurers are Vero Insurance, QBE Insurance and Calliden Insurance. It is recommended builders who currently have eligibility with either Lumley General or CGU contact their broker with a view to obtaining eligibility for home warranty insurance with one of the insurers continuing to provide home warranty cover (i.e. Calliden, QBE or Vero) well before December 1, 2009 (for builders having eligibility with CGU) and January 1, 2010 (for builders having eligibility with Lumley).

This development presents a setback to SPASA NSW establishing an alternative Home Warranty Insurance Product, as they had entered into an agreement with Lumley General. SPASA NSW has expressed a commitment to the concept, and is intending to negotiate with one of the three remaining approved insurers. SPLASH! will update this story in the upcoming issue.

SPASA NSW has also suggested that builders who experience difficulties or require further information call Peter Freeman of Nationwide Insurance Brokers to discuss their individual circumstances.