Starting April 30, only nine builders’ warranty insurance distributors will sit on Insurance and Care NSW’s (icare) new Home Building Compensation Fund (HBCF) panel – a roster that has been trimmed further in what a broker believes is a bid to eventually take brokerages out of the picture.
Previously, the HBCF distributor panel consisted of more than 100 qualified providers. The number was reduced to 23 in 2017, before the latest cut that takes effect at the end of next month. It was last October when icare commenced what the insurer described as a competitive, transparent, and robust procurement process.
An Insurance Business source, however, suggested that the selection that took place was, in effect, biased. Speaking on condition of anonymity, the broker asserted: “It was pretty clear that icare had already cherry-picked out of the existing distributors who they wanted, and created this tender criteria that they knew that only [the preferred ones] would make.”
Additionally, the broker claimed that icare went straight to the builders to notify them that their current provider did not make the cut – and, thus, they would have to engage with one of the successful distributors – instead of informing the brokers themselves that they wouldn’t be part of the new panel. According to the source, this resulted in clients calling their brokers and asking ‘what’s going on’.
The bigger implication, though, it was stressed, is around the ‘crippling’ nature of the move, with more than a handful of brokers now becoming unable to offer builders’ warranty insurance in New South Wales. Home building compensation cover in the state is only available from the government-operated icare HBCF, which distributes the product through its approved panel of brokers.
“They’ve taken away a significant portion of income for these [unsuccessful] brokerages, many of whom are small businesses and will struggle,” the source told Insurance Business. “This is going to impact people’s employment; people are going to lose jobs over this.
“And they’re going to displace builders, because I can’t see how all of these nine successful candidates will be able to pick up the additional workflow of the other brokerages that now don’t do warranty, in the space of a month and a half.”
The broker, who lamented that “it just reeks of mismanagement and corruption,” went on to state: “It sounds like they just want to phase out brokers altogether. It sounds like they don’t see the value in the way that brokers contribute to the overall warranty process and the eligibility process. They don’t value our input and they think that they can run it all themselves.”
It is the source’s view that reducing the amount of brokerages doing warranty is icare’s gradual moving “more and more away” from brokers being involved.
In response, icare group executive for prevention and underwriting Andrew Ziolkowski told Insurance Business: “Brokers play a key role in providing support and advice to builders seeking HBC insurance in New South Wales, and the new panel of distributors is intended to provide a better balance of portfolio opportunities and improved service for builders and homeowners.
“As icare noted in its submission to the Independent Pricing and Regulatory Tribunal’s review of HBCF, many brokers provide immense value to their customers and many builders require support with the complex processes involved in warranty insurance.”
Ziolkowski said refining the number of brokers on the approved distribution panel encourages ongoing commercial investment in the systems and processes that are needed in order to meet higher standards. He added that this supports icare’s strategy of closer engagement with its broker panel.
“Of the states with government warranty schemes, NSW has the largest panel of distributors, with the nine successful tenderers already servicing approximately 75% of builders,” noted Ziolkowski. “icare is confident these brokers have the capacity to scale.”
The insurer – which compared NSW to Victoria whose home building insurance scheme has six brokers and Queensland which has none – also said it notified in writing all unsuccessful distributors of the tender outcome on February 26, ahead of last week’s public announcement.
The nine successful ones are: Coverforce Insurance Brokers, Don Hutton – The Builders Insurance Broker, FINSURA Insurance Broking, HIA Insurance Services, Insurance House Group, Master Builders Insurance Brokers, MBA Qld, Savill Hicks, and Willis Towers Watson.
Ziolkowski added: “While we anticipate the broker community will be able to make commercial arrangements that suit their business and customers, icare is ready to assist builders with the transition if their brokers don’t make a suitable transition to partner with a broker on the new panel.”
Meanwhile the National Insurance Brokers Association, which Insurance Business understands is discussing the matter with icare, declined to comment.
