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Legislative Assembly for the ACT: 2002 Week 4 Hansard (11 April) . . Page.. 1002 ..

MR CORBELL (continuing):

residential sector of the building industry in the ACT. Dexta has advised the MBA that it will continue to insure those builders who have current policies for particular projects.

Members may be aware that the Building Act requires builders to take out residential building work insurance before they begin work. The insurance then protects building owners against the death, disappearance or financial collapse of the builder. After completion of the building work and the issuing of a certificate of occupancy, the insurance also provides ongoing cover for a further five years.

The collapse of HIH and the aftermath of the events of September last year have led to a series of crises for this product and many other insurance products; in particular, as most members would be aware, public liability insurance. As reported in the Australian Financial Review of yesterday, this issue goes wider than the ACT. Indeed, New South Wales and Victoria are experiencing similar problems.

Currently, there is a statutory requirement to provide this form of insurance, and residential building work cannot commence without it. The inability to provide this form of insurance means that builders who cannot obtain it simply cannot commence construction work.

The ACT branch of the Housing Industry Association has advised me that its insurer, Royal and Sun Alliance, is prepared to underwrite additional residential building work insurance in the ACT. However, there are limitations in relation to access to this insurance with respect to the time taken for assessments. I am advised that in some instances it may take a builder up to 16 or 17 weeks to get approval for insurance. Clearly, that is a major impediment for builders with projects about to commence.

The government is determined to ensure that residential building owners are protected as far as possible, whilst seeking to ensure that builders can continue to commence residential buildings. I want to ensure that the consumer needs of home owners and the industry's need to operate are protected fairly and as well as they can be in the existing circumstances.

As an urgent interim measure, I have asked Planning and Land Management to prepare a regulation under section 66 of the Building Act to allow builders who own the land on which a home is being built, often known as speculative builders, to postpone the requirement for residential building work insurance until the completion of work. A certificate of completion will not be issued until the insurance has been obtained. That is an important requirement to protect the ultimate home owner.

I would like to make it clear that builders who enter into a contract with an owner to build a house or to undertake extensions will still be required to obtain residential building work insurance before work commences. Again, that is absolutely to protect the consumer. The regulation that I have alluded to will not apply to the circumstances for contract builders.

Currently, this form of insurance is only available through the HIA's insurers, Royal and Sun Alliance. However, there are constraints in obtaining this insurance, including financial vetting, and, as I have alluded to, there is a lengthy time for processing applications, due to the need to ensure that builders will be able to complete the work.

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