Proposed changes to the Home Building Compensation Guidelines in NSW

We wanted to update you about the recently proposed draft changes released by the State Insurance Regulatory Authority (SIRA) to the Home Building Compensation Guidelines.

We have highlighted the key changes below for you

• Premium loadings: icare may apply premium loadings to contractors who fail to declare any variations greater than 20% to the contract price of insured work (inclusive of GST) or the reasonable market value of the insured work or do not pay premiums for variations to the contracts.
• Credit rating: When considering eligibility, icare may require contractors to obtain a specific rating from a credit rating agency. If obtained, icare may offer a discount for the insured work.
• Premium cap: icare to set a premium cap for insured work exceeding $2 million per dwelling (inclusive of GST) as if that contract price were $2 million per dwelling (inclusive of GST).
• Attracting private insurers into the market: In a win for the industry, the Guidelines appear to remove barriers for private insurers to enter the Home Building Compensation Fund (HBCF) market.
• Improving regulatory oversight of icare by imposing additional requirements such as:
  • prescribing circumstances in which icare may suspend or cancel eligibility immediately.
  • requiring icare to give its customers an explanation of any proposed percentage of gross premiums (excluding GST) intended to be retained as profit, before tax, and the actuarial basis for its calculation.
  • requiring icare to report to SIRA about its compliance with customer service conduct principles for eligibility.
• Claims Handling: The Guidelines propose to include a new requirement that insurers have systems to check that all rectification work complies with the national construction code and will be performed at reasonable market cost.