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Legislative Assembly for the ACT: 2002 Week 6 Hansard (16 May) . . Page.. 1767 ..

MS DUNDAS (continuing):

Structural reforms such as insurance pools will be the best long-term solution for bringing down premium prices. In the area of public liability, estimates suggest that this insurance reform could deliver immediate savings of around 30 to 40 per cent, especially for charitable organisations and sporting groups. But we have a government in the ACT that has endorsed group buying arrangements. This is a short-term answer as, given the small number of insurers actually left in the market and the reluctance to negotiate bulk discounts, any saving would be short lived as insurance companies strive for even greater profits.

In stark contrast to its treatment of community groups facing insurance problems, the government is bending over backwards to accommodate structural reforms to set up a fidelity fund for the MBA. I note with dismay that, as we did in public liability, we follow the larger states blindly. But, with the housing crisis, the government offers something totally different-truly, to quote Sir Humphrey, "a courageous decision, Minister".

Since 1988 it has been mandatory for builders to take out insurance to protect the consumers. But after today, if this bill is passed, it will be deemed suffice to contribute to a fidelity fund. This product offers a totally different level of protection and, it must be said, it is opening up a market for a new product where the MBA has had an insider's view into what that finished product will be. The MBA and the minister both heartily endorsed this project before any of the details had been fleshed out. The MBA, it seems, may have known the details and is happy to comply.

The housing market relies on consumer confidence and the goodwill that exists when a consumer engages a builder. In this is a trust that the builder will perform competently. If this is not the case, the problem will be fixed or money will be made available to engage another builder to fix the mistakes made by the earlier one.

Consumers are not normally the ones who choose the insurance. Consumers choose the builder and rightly expect the builder to be insured, as it is mandatory. But from now on, with this bill, the builder will be able to seek the different product of the fidelity fund, and it is unlikely that the consumer will even be aware of the different products available and the relative strengths and weaknesses of them.

The strength-it must be said-of the fidelity fund is that, if the builder performs incompetently, goes broke or disappears, the peer group pressure of the MBA will send the same builder back to fix the problem. But I wonder whether consumers would be happy with that or whether they would actually prefer a payment to engage a different builder to fix the problem.

In his presentation speech the minister stated that the insurance market used to contain two providers: Dexta and Royal & SunAlliance. Recently, Dexta pulled out of the market, and Reward Insurance has offered to come in. This would seem to be a return to the status quo and a fairly acceptable response.

However, the minister, while saying that the status quo could be returned, believes that it is more prudent to rush through with structural reform, change the mandatory requirements for builders and establish a totally different product, creating, I would suggest, a two-tiered system with a monopoly on insurance to be held by Royal & Sun

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