Home / Local / No ‘windfall’ for insurers under cladding fix: ICA
22 July 2019
The Insurance Council of Australia (ICA) has rejected suggestions that insurers will enjoy a “significant windfall gain” from Victoria’s cladding rectification plan and should therefore help fund the repairs.
The state last week announced a $600 million program to remove the dangerous material from private high-rise buildings, following a proposal in the Victorian Cladding Taskforce’s final report to the Government.
Obtaining financial contributions from insurers is also on the taskforce’s list.
“If [the] Government funds and co-ordinates rectification as we have recommended, the liability of insurers for existing buildings is likely to be reduced,” the taskforce’s report says.
“Accordingly, it is reasonable for government to negotiate with insurers with a view to their remaining in the market.
“Further, to the extent that government provides funds for rectification, insurers receive a significant windfall gain. It is therefore reasonable for them to make a substantial contribution towards the costs of rectification.”
Insurers have stopped providing exclusion-free professional indemnity (PI) cover to building surveyors and certifiers as problems mount for the construction industry over cladding and defects issues. The move follows huge PI claims losses for insurers.
“Insurers are at the end of the risk management process,” ICA spokesman Campbell Fuller told insuranceNEWS.com.au.
“The taskforce may not be aware that insurers have been losing $3.40 for every $1 collected in premiums this decade for professional indemnity insurance for building professionals."
Rejecting the assertion that insurers would receive a significant windfall gain if the proposed plan to fund cladding rectification is implemented, he says the cost of rectification and compensation “should be borne by the sector responsible for the issues in circumstances where property owners no longer have an insurance-derived solution”.
Strata Community Association NSW has urged the state to follow Victoria’s lead and introduce a similar cladding rectification program.
“The Victorian Government has put $600 million on the table to address this issue and the NSW Government – supported by the Commonwealth – needs to look at matching this figure,” the association’s State President Chris Duggan said.
The cladding problem in NSW could cost $1 billion, the association predicts.