Building Indemnity Insurance

13 May 2010 questionsarchive

I seek leave to make an explanation before asking the Minister for Consumer Affairs a question on the subject of building indemnity insurance.

The Hon. J.M.A. LENSINK: In a media release on 25 July last year, the minister stated:

OCBA had received 87 complaints about home renovations so far this year, compared with 65 complaints received over the same period last year…there have been some complaints involving many thousands of dollars of work but no indemnity insurance for the consumer to claim against.

In April last year, in response to a question in this place, the minister stated that OCBA had been working on a discussion paper, including options to deal with issues surrounding indemnity insurance, but that 'the review has since been overtaken by the Council of Australian Governments' decision in July 2008 to pursue a national trade licensing system'.

Building indemnity insurance (known as home warranty insurance in other parts of Australia) has also been tagged as 'junk insurance' by the Australian Consumers Association, and concerns have been raised by industry groups like the Master Builders Association and the Builders Collective. It is a low risk product for insurers, being a last resort scheme for consumers, and has a rejection rate of some extraordinary 45 per cent of claims made—and that is Australia wide. My questions are:

1. Can the minister provide an update on the national trade licensing system?

2. What decision has been agreed to in relation to building indemnity insurance by COAG or the relevant ministerial council?

3. What are OCBA's options for dealing with the rise in complaints against builders?

4. Does the minister consider this rise in complaints as an emerging trend and what does she intend doing to address it?

The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister for the City of Adelaide) (14:55): I thank the honourable member for her important questions. The national licensing scheme is being progressed under the COAG agenda to simplify licensing for selected occupations. Once a licence is issued, the licence holder will obviously then be able to use that licence to work anywhere in Australia without additional paperwork costs. COAG has agreed that a national licensing initiative be applied not only to building but also to electrical, plumbing, gasfitting, air conditioning, refrigeration and other occupations. Over the past two years the commonwealth, states and territories have worked collaboratively with industry and occupational regulators to improve that current system of mutual recognition of licences for a number of occupations.

However, under mutual recognition, licence holders in one state obviously still have to apply for licences in others. The benefits are obvious in moving to this new system. It will reduce the number of licence categories and make it simpler for those organisations to work across borders. A number of licensing reform principles have been put in place which will be really valuable. The establishment of an intergovernment agreement is progressing on that. The national licensing authority will commence its operation in 2011, and the national licensing system is due to commence on 1 July 2012 for a number of those industry groups. Obviously key stakeholders are playing a key role in the design of those developments. Those matters are still under way and are still being worked through and rolled out. There were a number of other questions, so I will seek to take on notice the other matters raised and bring back a response.

Wednesday 21 July 2010

In reply to the Hon. J.M.A. LENSINK (13 May 2010).

The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister for the City of Adelaide): I am advised:

The Ministerial Council on Consumer Affairs has not made any decisions on Home Warranty Insurance, nor am I aware of any decision having been made by the Council of Australian Governments on the topic.

However, I have asked that the South Australian Office of Consumer and Business Affairs (OCBA) raise the matter of Home Warranty Insurance with South Australia's representative on the National Occupational Licensing System Steering Committee, as the body that will consider licensing eligibility requirements during the development of the National Occupational Licensing System.

3 & 4 The number of complaints varies from year to year. Overall, however, the number of complaints referred to OCBA remains small when compared to the level of building activity across the state.

When complaints are received, and builders are found to have acted unlawfully, I am advised that OCBA has a range of powers to take action against builders. OCBA has the power to suspend licences immediately in some circumstances and can take disciplinary action to have a builder's licence cancelled. OCBA can also seek an enforceable undertaking from the builder.