Background - What has happened in NSW Home Warranty in the past 2 - 3 years?
On the 3rd November 2016, Minister Dominello, on behalf of the NSW Government announced an overhaul of the NSW HBCF. You can read the full announcement here.
In the reform announcement, it was stated that these changes would allow ‘private sector providers…to enter the market to encourage product innovation, choice and competition’.
Since this announcement we have not seen any product innovation but the reduction of underwriters by removing RBUA and QBE as panel insurers and the restriction of Authorised Distributors down from over 300 brokers to just 24 authorised brokers and costs which have increased dramatically despite the removal of commissions paid to brokers.
The good news is that a new service provider is currently being Assessed & Licensed by SIRA (State Insurance Regulatory Authority for NSW). The new provider aims to be authorised before June 2018.
NSW HOME OWNERS & OWNER BUILDERS
Do I need Home Warranty Insurance as the Home Owner or Owner Builder?
The contractors who contract to you are required to provide Home Warranty Insurance if their contract exceeds $20,000.
For more information on your responsibilities or the responsibilities of your builder visit NSW Fair Trading
Is this new provider different in their underwriting approach compared to iCare (Insurance for NSW)?
The new provider’s approach is very different to iCare, here are a few examples of how they approach key areas differently
1. Eligibility Process
The process of eligibility currently requires financials, tax returns, bank statements, deeds and a lot of other information. In a lot of cases, builder’s are asked to go back to their accountant to get more information.
The new provider takes a different approach. They ask your Accountant to declare to them what the Net Assets available to you are by completing a Minimum Financial Requirements (MFR) declaration form. In most cases, that will be all that is required. One declaration form signed by you and your accountant.
The new provider’s benchmark is that provided the documentation is completed correctly, eligibility should be able to be assessed in less than one hour, you send us the MFR declaration, we input the information and attach the declaration and their assessment system approves the eligibility instantly.
2. What about annual reviews or periodic eligibility reviews?
There are No Annual Reviews or Periodic Eligibility reviews. Instead, you have to complete a new MFR declaration if your Net Assets vary by more than 20%. So for instance if you have $40,000 assets, you need to complete a new declaration with your accountant if your assets exceed $52,000 or drop below $28,000.
3. What about the premium, will this cost me more?
In most cases no. You can use this switching calculator with to see if this new provider will save you money.
4. Improve your cashflow by receiving payments on time from home owners without stage and expectation disputes
The new provider is very pro-active, their system is set up to ensure that the builder and the home owner are updated at key stages throughout the build process. This includes site visits and defect inspections which on confirmation that the build is defect free, informs the home owner that the inspection was completed and that the home owner must now pay the next instalment.
5. What would I be eligible for?
The new provider works on an annual eligibility amount based on the Net Assets as declared in your MFR declaration. Using the turnover levels table below, you can calculate what turnover you would be eligible for based on your Net Assets. Your net assets will be based on an adjusted figure that your accountant would help you calculate.
For instance, if you have $40,000 net assets, you would be able to apply for up to $2,000,000 in HBCF work per year as a rolling 12 months, so on completion of a project, 12 months later the eligibility from that is restored and made available to re-use.
The approximate number of projects is a guide and not an eligibility limit. For instance, a builder in the first category may be a renovation specialist, for them, the $1 Million limit might be 10x renovations rather than 1 to 2 new home builds.
6. I am concerned that the site inspections slow my projects down
The inspectors that contract to the new provider are required to commit to a 48 Hour inspection from the time that you tell them it is ready for inspection. At the completion of a project you get to rate the service of the inspector and so does the home owner. It is in their interest to ensure they communicate with you effectively and turn up on time, if they don’t receive high enough reviews they will no longer be able to operate as an inspector. It is in their interest to be on time and not slow you down!
7. Do I have to change to this new provider?
No. That’s the best part! For the first time in years you now have choice. That’s where we come in to help you decide which provider is best for you. Our role as your insurance broker isn’t limited to getting you eligibility or processing a certificate; we’re here to help you understand the changes, how each provider will work, helping you pick the provider that will work best for you.
What about project certificates, how are they issued, and, do I need to use a special distributor?
Our office will be able to provide you with eligibility and with certificates. We will be authorised by the new provider to assist builders with their HBCF policy requirements. You will no longer need to go through the iCare appointed distributors unless you choose to continue with iCare as your HBCF / Home Warranty Provider.
Project certificates can be issued over the phone with our office or by providing us with a copy of the contract and credit card payment. Our office will enter the details into the portal and accept the credit card payment processing the certificate on the spot. The certificate is then emailed to your office and to the home owner directly by the new provider.
How do I find out more information or arrange for my builder to transfer to the new provider?
You can call our office on 02 4322 7856 and speak with Jacob, Melanie, Natalie, Brett or Maria to register your interest.
FAQ & DOCUMENT LINKS
a. Where can I find the Net Asset calculations for the new provider? – click this link
b. What is the MFR declaration that I will have to sign? – click this link
c. What is the website address for the switching calculator? - https://www.securebuild.com.au/calculator/
d. Is there a page with a list of the benefits for me as a builder if I switch? - https://www.securebuild.com.au/builder-benefits/