Home Warranty Reform

Home Building Compensation Fund (HBCF) Reform

The NSW Government is reforming the Home Building Compensation Fund (HBCF), commonly known as Home Warranty or Builders Warranty, to improve customer protection, improve competition in the market and make the scheme sustainable for the NSW home building sector.
The premium settings and basic operations have remained unchanged since 2010, resulting in costs which have not been fully funded by premiums.
The Minister for Innovation and Better Regulation, Victor Dominello, recently announced reforms to the HBCF insurance scheme to ensure the Fund regains financial sustainability so it can continue to protect NSW homeowners now and into the future.
icare hbcf recognise a premium increase alone is not an appropriate response. A total review of operating costs, outsourced services, IT capability and eligibility assessment practices are also being performed.

Premium changes

icare hbcf has revised premiums to keep pace with the claims experience across the various construction types. The new premiums are targeted to achieve a breakeven sustainable position for each construction type over two years and remove cross subsidisation. They also reflect the risk each construction type category now holds and will represent a specific percentage of the building contract price.
icare hbcf are announcing the first of two rate changes effective from 3 April 2017 and 2 October 2017. New premium rates should be included for jobs where HBCF insurance is required after 3 April 2017.
There will be further premium increases in 2018 subject to approval from State Insurance Regulatory Authority. icare hbcf will communicate 2018 increases once approved.

Risk-based pricing

Lower risk builders will receive more equitable outcomes and transparency under the new reforms that introduce risk based pricing. A discount or loading impact capped at 30% will be applied to a builder’s Base Rate premium depending on their risk profile. Eight pricing factors will be considered in determining a builder’s risk profile.
1. Time entity licence held
2. Business structure (i.e sole trade, partnership, company or trust)
3. Adjusted net tangible assets (ANTA) in entity
4. Net profit before tax or taxable income
5. Adverse past history
6. Reviews not current
7. BCRP participation
8. Audited accounts

For further information, please feel free to contact a CRM Broker on 1300 880 494.