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Building report calls for mandatory recall insurance

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A Senate inquiry report has called for mandatory product recall insurance for high-risk building products to be considered.

The Economics References Committee published its final report on non-conforming building products last week.

It says dodgy building products are increasingly putting lives at risk and forcing up insurance premiums.

The committee had already released interim reports focusing on two of the most serious issues – imported materials containing asbestos and flammable building cladding.

The final report also addresses concerns with non-conforming electrical products, lighting, windows and glazing, plumbing, engineered wood products and steel.

“The committee is extremely concerned by evidence to this inquiry that illustrates the growing prevalence of non-conforming building products,” the report says.

“Non-conforming building products pose serious risks to the construction industry, workers and the broader community.”

One possible measure would be the introduction of mandatory recall insurance for high-risk building products, because manufacturers or suppliers often go into liquidation after a product is identified as unsafe.

“The committee believes that where building products are deemed to be high-risk, consideration should be given to requiring importers and suppliers to hold mandatory recall insurance,” the report says.

Insurance Council of Australia GM Risk Karl Sullivan told insuranceNEWS.com.au he supports the intent, but there are complications.

“I can support the spirit of what they are trying to do, but there would need to be dialogue to make sure there were no adverse outcomes.

“Product recall insurance is available on a voluntary basis. If it became mandatory, who decides what is a high-risk building product and what is not? Is it retrospective? You could see a dampening down of building innovation.”

The report says the committee received evidence of products across a range of industry sectors that: are not fit for purpose; do not conform with the required Australian building regulations and technical standards; are counterfeit copies of legitimate conforming products; and are supplied with fraudulent certification or documents.

The committee makes a series of recommendations including that the Building Ministers’ Forum speeds consideration of a mandatory third-party certification scheme for high-risk building products and a national register for these products.

The forum should also examine international approaches for testing high-risk products, and government should develop a “confidential reporting mechanism” to enable industry and other stakeholders to report non-conforming products.

“The costs of non-conforming products are being passed on to consumers through costs of remediation, devaluation of properties, increased insurance premiums and costs associated with reduced energy and water efficiency,” the report says.

“Further, importers, suppliers and manufacturers of products that conform to Australian building regulations and technical standards are being forced to compete on an uneven playing field with cheaper, inferior non-conforming building products.

“The committee is particularly concerned about the potential safety risks to consumers and construction industry workers including risks of fire, electrocution, exposure to toxic chemicals and water contamination.

“Without urgent and effective action the risk to Australian lives will only increase.”

Read the full report here.