Legislative Assembly for the ACT: 2003 Week 9 Hansard (26 August) . . Page.. 3145 ..
MS TUCKER (continuing):
scope of the scheme reduced, particularly in the larger states. Residential building warranties have always had a somewhat narrow scope in the territory, so the ramifications of this bill are not very substantial.
While the so-called insurance crisis has resulted in less coverage for more people, with more stringent conditions in almost all situations, it does not seem to have delivered lower premiums in almost any area, despite booming profits. Indeed the Australian Financial Review of 18 August quoted international ratings agency Standard and Poors as saying that non-life insurers are enjoying a period of unprecedented premium rate increases and popularity among market investors. The insurance crisis is paying off very well for some.
The problem with the existing warranty system, which will not be addressed by this bill, is that it only provides cover if the builder dies, disappears or becomes insolvent. So, in most instances, the protection is minimal. The other limitation with the situation we face here is that there is only one insurance company in the marketplace, so there is no competition. We are, in this area as in others, at the mercy of one insurance provider.
It was not long ago-last year, in fact, after Dexta withdrew from warranty insurance-that we introduced a scheme whereby fidelity funds could provide building warranty protection. The MBA has established a scheme under that legislation. The fact is, however, that the fidelity schemes are not APRA compliant and so, to a degree, are less secure. It is also a fact that the Tasmanian government recently shut down the fidelity fund offering such protection in that state. So we do want to ensure that insurance cover continues in the ACT, despite the lack of competition.
I will be supporting this bill as at least it makes the scheme consistent with the one over the border, in New South Wales, and the ones in other parts of Australia that would make a consistent environment for builders. Because this bill makes it explicit that the scheme is only an insurer of last resort and that it does not cover developers-whose claims, when successful, tend to be of a high order-it may encourage the insurance provider to bring down premiums to some small extent at least.
MS DUNDAS (10.54): As has been said, this is another part of the ACT government's response to the insurance crisis, particularly as it relates to building in the ACT. In 2002, a system was introduced that was meant to go some way to addressing the concerns that the building industry had in terms of being unable to get insurance in the ACT. The establishment of the fidelity fund was in response to the ongoing insurance crisis. It appears that the establishment of the fidelity fund did not go far enough, that we still have insurance companies which are unhappy with the laws in the ACT and how they impact on their ability to provide an insurance market, so we have this piece of legislation before us today.
The bill does do some positive things, but they are things that have been dictated to us by the insurance companies. As I have said all the way through this legislative response to the insurance crisis, maybe we need to be looking at how the insurance companies are operating as opposed to continually trying to limit people's rights or impact more on what is being insured as against how the insurance is being provided.