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ICA explains its ‘crisis of confidence’ in building sector

The Insurance Council of Australia (ICA) has told an NSW inquiry into building standards why insurers have developed a “crisis of confidence” in the construction industry – and what can be done to bring them back to the table.

Submissions to the Public Accountability Committee inquiry into the regulation of building standards, building quality and building disputes have now closed.

ICA says in its submission that insurers, like the community, “assumed that buildings are indeed constructed to meet or preferably exceed…minimum standards”.

However, it says this assumption has now been proven false.

“A number of high profile compliance failures in NSW, coinciding with use of non-conforming and potentially dangerous external cladding on modern and some refurbished buildings, has led to a crisis in confidence for insurers who provide professional indemnity coverage for building professionals, and increasingly for insurers who insure the physical buildings once construction has been completed.”

This has led to exclusions in professional indemnity insurance products for certifiers. They have removed cover for works relating to cladding or non-conforming building products.

The owners of buildings with major defects are also finding it increasing difficult to obtain insurance cover.

ICA provides a list of measures that must be taken, including: restoring confidence in compliance regimes; removing uncertainty from liability; improving building documentation; improving building research; quantifying the compliance problem; and harmonising defect liability regimes.

“ICA submits that there is significant reform required across the nation in order to improve the built environment and how it is perceived by all stakeholders,” the submission says.

The council says it “is encouraged by the appointment of the NSW Building Commissioner and looks forward to engagement with this office to work towards re-establishing confidence in the sector”.

“Once this is achieved, and compliance failures can be seen to be reduced, [professional indemnity] providers will be able to consider a return to the market with unrestricted products.”

Click here to see the full submission.