HBCF reforms | Home Building Compensation Fund (HBCF) | Master Builders Insurance Brokers (MBIB) | Homeowners Insurance | Home Warranty Insurance New South Wales
How is the Home Building Compensation Fund changing?
In April 2017, the NSW Government introduced reforms to the HBCF to ensure its financial sustainability and ability to protect homeowners now and into the future.
These changes include risk-based pricing meaning lower risk building contractors will receive more equitable outcomes on their premium resulting in the first of four price rises.
As part of these reforms, icare (Insurance & Care NSW) has appointed a revised panel of HBCF Distributors effective 3 October.
MBIB is one of only 24 brokers to have been granted a licence to act as a Distributor of icare.
If MBIB is your current Home Owner Warranty (HBCF) broker, you don't need to do anything.
Not an MBIB client? All registered builders in NSW wishing to purchase insurance from icare must now select a licensed Distributor to manage their HBCF needs from 3 October 2017.
You are now able to utilise the icare HBCF online self-service portal available here. We are able to show you how the new system works so you can elect to apply for your certificates online or use our MBIB Job Specific team to process them for you.
1. Broker commissions
The commission of 15% previously paid to brokers by HBCF has been removed.
2. Builder risk-based premium
Premium prices better reflect a building contractor’s level of risk, resulting in high-risk contractor paying a higher premium, and a low-risk contractor receiving a discount. Each individual business with an Eligibility facility now has a rate somewhere between 30% Discount to a 30% Loading.
3. Premiums sustainably
The shortfall between the HBCF’s costs and what is received through premiums is currently covered by the NSW Government. This subsidisation of premiums has been removed and premiums have been increased to ensure they meet the expected costs of future claims.
4. Cross subsidies between types of products
As an example, single dwelling premiums will no longer subsidise multi-unit premiums. All certificates now have a specific rate applied depending on the classification of the build for instance; a single dwelling rate will be different from an alteration and additions project which will be different to a multi unit project.
5. Market opens to the private sector in 2018
Private insurers or alternative indemnity product providers will be able to apply to SIRA (the State Insurance Regulatory Authority) for a licence to enter the home building compensation market alongside the government provider icare HBCF. Applicants will need to satisfy prudential or other conditions to be licensed. Like private sector participants, icare HBCF must apply to SIRA for approval of its premiums. icare HBCF will also have to contribute towards the costs of the scheme in the same way as private sector participants.
The reforms will allow Alternative Indemnity Product (AIP) providers, such as fidelity fund schemes, to enter the market in addition to APRA-authorised insurers.
These products and providers will be subject to equivalent requirements to insurance products and insurers under the home building compensation scheme. AIPs will need to provide the same minimum level of cover as insurance providers under the scheme. AIP providers will need to apply for a licence, and will have to satisfy prudential and other requirements. AIP providers will also need to contribute to the cost of regulating the scheme.
For more information, talk to our specialist HBCF team.