Calls are intensifying for consistent national standards in home warranty insurance as a Western Australian investor’s lengthy battle with an insurer highlights systemic issues in consumer protection.
In an interview with ABC, Amarjit Singh Pabla, 73, said he faces mounting financial strain after his builder’s collapse left his eight-unit residential development defective and unsaleable. Despite mandatory insurance coverage being in place, Pabla has spent three years seeking a settlement from QBE Insurance.
“I have no money. I have put everything which I had into building these apartments,” he told ABC, adding that he has paid approximately $32,000 in legal fees to communicate through QBE’s third-party lawyers.
Builders’ warranty insurance, required for residential projects over $20,000 in Western Australia, capped payouts at $100,000 at the time of Pabla’s contract. He said the capped liability offers insurers little incentive to quickly resolve claims.
QBE stated it could not comment on individual claims due to privacy restrictions. However, a spokesperson told ABC that the company continues to work with all involved parties and complex matters – including structural issues and encroachments – often require significant investigations, contributing to delays.
The insurer said it is common practice to appoint external legal representatives in complex claims to manage compliance and procedural requirements, adding that settlements are typically handled progressively as defects are assessed.
Pabla said that while QBE reimbursed him for plumbing-related repairs valued at around $12,000, it has yet to settle larger claims for structural and acoustic defects, which a 2022 assessment estimated at over $700,000. He also claimed delayed disclosures and additional legal hurdles have complicated his efforts to secure full compensation.
Builders’ warranty insurance schemes differ across Australian states and territories, with various terms such as “domestic building insurance” in Victoria and “home building compensation cover” in New South Wales. Coverage terms, policy caps, and claim processes also vary significantly.
John Berrill, director at Berrill & Watson Lawyers, said most consumers are either unaware of the insurance in their building contracts or unfamiliar with its limits.
“Because this insurance kicks in as part of your building contract, most people don’t even know they have it – or if they know they have it, they’re not looking at the details of it,” he said, as reported by ABC.
Berrill advocates for uniform national rules, including maximum claim timeframes and standardised policy terms, to improve consumer outcomes.
Regulatory concerns regarding insurer practices are not new. In 2015, the Australian Securities and Investments Commission (ASIC) criticised insurers' use of external law firms, warning that third-party correspondence could deter consumers from pursuing valid complaints. In response, QBE agreed to ensure all customer communications about complaints were issued under its own branding.
The broader industry faces additional scrutiny as the federal government proposes expanding the Home Guarantee Scheme to assist more first-home buyers.
The Insurance Council of Australia (ICA) has warned that broadening eligibility could destabilise the financial system by reducing demand for lenders' mortgage insurance (LMI).
ICA chief executive Andrew Hall said government support programs should be narrowly focused on buyers facing real barriers to ownership, not extended to those with stable incomes and savings.
The ICA also urged policymakers to ensure that new housing projects funded under the scheme are not located in areas prone to natural disasters.
