The NSW government has established a Ministerial Advisory Panel that will be tasked to advise on the planned introduction of decennial liability insurance (DLI) into the Australian market.
Minister for Better Regulation and Innovation Kevin Anderson said DLI is a special type of insurance taken out by the developer to guarantee against major defects for up to ten years.
"The NSW Government has embarked on revolutionary reforms in the building and construction sector aimed at promoting a safer and stronger industry," he said.
Mr Anderson said the state government has laid the foundations for DLI, which is currently not available in Australia, over the past 18 months through reforms involving the Building Assurance Solution and the Risk Rating tool.
"Our nation-leading reforms will explore the potential for insurers and developers to provide an insurance safety net for consumers that is currently lacking in the multi-unit high rise sector," he said.
What the DLI is for
Mr Anderson said a DLI policy would cover potential serious defects which could potentially show 10 years after a project's completion.
"This would give confidence to consumers to buy into multi-unit residential construction in NSW,” he said.
Furthermore, the introduction of this type of insurance would address the illegal practice of "phoenixing", as only developers that demonstrate a commitment to a long-term market presence will be able to acquire a policy.
"Insurers will be assessing developers’ ratings score, their corporate governance and balance sheets. While good quality work will be underwritten, poor quality developers will find themselves out of the market,” Mr Anderson said.
“Establishing a market for DLI would mean untrustworthy developers are weeded out, creating a stronger, more competitive market where consumers can purchase with confidence.”
Establishing the advisory panel
The state government has reached out to key construction industry stakeholders, insurers, strata bodies, and representatives from the government to form the Ministerial Advisory Panel.
The panel will be chaired past Insurance Council of Australia (ICA) President Gary Dransfield, who said DLI would lead to greater protection for consumers against major defects.
"I am really pleased to be able to assist the NSW Government and industry participants to develop an insurance proposition that will build on the reforms already delivered and further enhance protection for apartment buyers,” he said.
ICA CEO lauded the efforts of the NSW government to form an advisory panel.
"The ICA supports the establishment of the Decennial Liability Ministerial Advisory Panel and congratulates the NSW Government on bringing about further leading building reforms, targeted at improving the quality of building product produced in NSW," he said.
Photo by Brandon Griggs on Unsplash.
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