Monthly Archives: April 2014

Industry groups concerned about home builder insurance red tape

  • Nathan Mawby
  • Herald Sun Real Estate
  • April 03, 2014 3:03PM

VICTORIA’S government run domestic building insurance underwriter has come under fire for tying up the states builders with red tape and a lack of transparency.

The state’s peak housing body, the Housing Industry Association of Victoria, has raised concerns over rising levels of red tape being issued by the only provider of insurance for home builders in the state, the Victorian Managed Insurance Authority.

Meanwhile the Builders Collective of Australia noted some builders were being delayed for up to six months as they awaited assessment for insurance eligibility, and raised questions over the transparency of decisions.

HIA Victorian executive director Gil King said the industry group had concerns with rising amounts of insurance red tape being applied to builders.

“It’s another layer of bureaucratic red tape that builders have to wade through,” Mr King said.

“Every year, the administrative burden has another hurdle to jump.”

Phil Dwyer, national president of the Builders Collective of Australia, said he was aware of builders facing lengthy delays for insurance approvals.

“The assessment of builders in some cases seems to be taking a long, long time,” Mr Dwyer said.

Builder Peter Onley, who has built more than 2000 homes in almost 30 years, began applying for Domestic Building Insurance for jobs slated to begin in July last year. He made 11 further applications for insurance, without receiving a yes or no response, up to October when a lack of cashflow, in part caused by a client withholding more than $200,000 in payments, forced him into administration.

Months later the VMIA informed Mr Onley he was a “moral hazard” and was to be refused insurance.

Prior to the rejection Mr Onley paid down debts and restructured his business to make it more viable, but is now concerned he will have to let his five staff go.

“We haven’t been able to start any new business since July 17, 2013,” Mr Onley said.

“All they (VMIA) have issued so far is a proposal to deny.

“I have been red taped out, and I had never had an insurance claim against me previously.”

Mr Onley said he had no intention of leaving clients in the lurch and was requesting a review by VMIA.

Peter Ryan, chief executive of the VMIA, said the underwriter aimed to turn around insurance applications in 25 days.

“The vast majority of insurance applications are processed extremely quickly,” Mr Ryan said.

“For example, the target for new builders seeking insurance with VMIA with turnovers up to $10 million per annum is 25 days. Shorter targets apply for builders with smaller turnover limits.

“Longer time frames can apply where builders provide incomplete or inaccurate information, or the builder’s circumstances require a more detailed financial assessment.”

He said industry bodies had been supportive of the VMIA and its role in providing domestic building insurance.

Mr Dwyer, and Rob Berry a partner at BCR Partners which helps at risk builders make their businesses more viable, are now calling on builders who believe they have been disadvantaged by insurance decisions to alert them to the grievances as they push to have the system reviewed by the state’s Auditor General.

Mr Berry, who acted as the administrator for Mr Onley, said the builder had secured the consent of his creditors to continue trading prior to the VMIA’s rejection.

“We have worked with 18 distressed builders and about 250-odd projects, and in the commercial space they are fine — because there’s no VMIA,” Mr Berry said.

“We approach the creditors and try to get a consensus for the company to trade on, doing a restructure of the business, and then the VMIA say ‘no, we are not comfortable with this’ on the basis of the outcomes offered to the creditors,” Mr Berry said.

Mr Dwyer said in any other industry ASIC would allow a business the chance to continue working with administrators.

“The regulators say he can have another chance by entering into an agreement with his creditors,” Mr Dwyer said.

Mr King indicated he believed delays to building projects caused by the VMIA would be the exception to the rule.

BCR Partners and the Builders Collective of Australia intend to present builders’ concerns to the Auditor General’s office which will make a decision on whether to pursue a proposed investigation into domestic building insurance by June this year.