- Home
- Hansard & Papers
- Legislative Council
- 9 May 2002
Home Building Amendment (Insurance) Bill
Printing Tips |
Print selected text
| Full Day Hansard Transcript
« Prior Item |
Item 39 of 52
| Next Item »
Page: 1880
Second Reading
[Debate resumed.]
The Hon. JOHN RYAN: Insurance premiums will not be reduced even though the benefits have been cut. That alone should justify the inquiry. We should summon representatives of the insurance industry and ask them why. If it is good enough for the motor accident insurers to appear before the Standing Committee on Law and Justice when their scheme is being reviewed, I have no guilt in asking the companies providing this type of insurance to appear before that committee to account for why premiums should not fall given that the benefits have been significantly reduced. The current scheme provides for building constructions to be insured according to warranties available in the Home Building Act. They are too complicated to explain now but members can read them for themselves. The building should be carried out in a workman-like manner and with materials that are suitable for the purpose for which they are intended. The building should also satisfy the purpose for which it was intended and so on.
Policies under the current scheme guarantee those warranties for seven years. This bill defines a building in terms of structural and non-structural items. Non-structural items will be guaranteed for two years; structural items will be guaranteed for six years—a reduced period. It is reasonable for us as legislators to ask why six years was picked. Will this mean that reasonable claims that could have been made against the current insurance scheme cannot now be made? When people build a house they expect that its essential elements will last a good deal longer than six years. I have no doubt that the most litigated section of the legislation will be section 57AC (1) (b), which refers to the meaning of "structural defect". The crucial line is anything which "prevents, or is likely to prevent, the continued practical use of the building or any part of the building". It will be endlessly investigated by lawyers trying to work out what is in and what is out.
In order to brief Mr Debnam in another place on the impact of the bill I made a little list of items off the top of my head. I have not been able to do research on this matter but I tested the list on representatives of the Department of Fair Trading. I was reasonably satisfied that I had stumped them in their capacity to provide immediate answers. People will want to know whether these types of items are covered or not covered. If there is a problem with the front door jamb the home owner might be able to come and go and continue living in the house, but would it be a structural or non-structural defect not to be able to lock the House? How would it affect the owner's practical use of the house? There would still be access to the house and the building would still keep out the rain. This is the sort of thing that could be expected to break down after a period. The frame may have warped in the rain and the builder may deny responsibility. What about windowsills and window fittings? Are they structural or non-structural? We have no idea. They might be guaranteed for two years. If the rain pours in through the window, is that a structural or non-structural matter?
The Hon. Henry Tsang: Non-structural.
The Hon. JOHN RYAN: Well, I do not know. At the Joint Select Committee on the Quality of Buildings I asked representatives of local councils: Would you like to define the difference between structural and non-structural works? The answer I received was, "I would hate to be in a position of deciding what was in and what was out."
The Hon. Dr Arthur Chesterfield-Evans: There will be precedents in a few years.
The Hon. JOHN RYAN: There will be plenty of precedents, which will have been expensively litigated, no doubt. In the Fair Trading Tribunal or its successor people may be subject to the whim of the presiding member on the day. They do not publish many of their decisions. Consistency has not been a feature of the Consumer, Trader and Tenancy Tribunal. A plumbing problem might arise that is not as a result of the pipes. There could be debate about whether it was caused by a root growing through. Is that a structural problem? One of the most common problems in homes is leaky showers. Is that a structural problem, particularly if it is in the bedroom ensuite? Does that prevent the owner from practical use of the house? Probably not, so it might be non-structural.
We should know what sorts of things will be in and what sorts of things will be out. Some things are obvious. If we are going to limit claims on the floor slab, roof joists and framework of the house to six years, I want to know why that period was picked. I understand that it was the lowest common denominator of what operates in the other States. That may not necessarily be the right sort of level. There is an argument that some features of the house ought to be guaranteed for longer than six years and others for shorter periods. The Government and the insurance industry would argue that there needs to be a limit. I understand that long-tail business is very expensive to underwrite. But we should not prohibit reasonable claims and the guidelines for claims should be reasonably clear so that we will not involve consumers in very expensive arguments which will eat up the value of their insurance policies.
Cover is limited to $200,000 for the whole house—the current limit—but only 20 per cent of the contract price if the building is incomplete. The scheme is supposed to cover people for the last instalment they have paid for the construction of the house. But many people will find the litigation to resolve whether they are entitled to a claim eats up the amount of money available. An additional problem is that very few builders will be interested in completing another builder's work at the same price the previous builder agreed to provide it for. The cost of completing a house will increase simply because builders do not want to finish someone else's work. They do not want to take the risk of building on top of someone else's work. The second builder probably would have to take out a second insurance policy to cover the building because the previous policy would have been exhausted. I have rulings of the Fair Trading Tribunal—I do not have them with me—that show that it may even be necessary for builders to do that. So an additional cost will be involved.
I have not seen this flashed across the pages of the Sydney Morning Herald, but the new scheme cuts the benefits to households and consumers very significantly. I think the Government is trying to sneak this through Parliament without telling people what is going to happen. They will start to discover this long after the horse has bolted and it is too late. A committee would at least have the opportunity to make that information available to the public so that the public will at least know what they will get. The Opposition does not believe that the bill deals with the problems that home builders have had in getting access to insurance. We are concerned about the reporting and service standards required of insurers.
Finally, we are concerned about the detail—because the devil is in the detail—of how it will impact on consumers. When we were reforming various aspects of consumer protection related to the home building industry at the end of last year it was explained to me in detail that this was a package in which all the various bits fitted together to make a consistent whole. Now we are changing one of the bits very significantly and seriously, against the interests of consumers. I need to be sure that the rest of the package still holds together and provides adequate cover and protection for insurers. The Government may claim that the regulation of the building industry is complete. We are now licensing and supervising builders much more rigorously and the Consumer, Trader and Tenancy Tribunal is dealing with these things a great deal faster.
In preliminary evidence to the Joint Select Committee on the Quality of Buildings representatives from the Fair Trading Tribunal said that only 20 per cent of matters currently dealt with by it are getting speedy treatment and that everything else is proceeding through the tribunal at the same level of attention it previously got under the old the scheme. In my view that 20 per cent should be discounted for a very important factor: some people who go to the tribunal for speedy service, and are getting it, formerly went to the Department of Fair Trading where they also got it. So it is highly likely that all the matters that used to go to the old Fair Trading Tribunal are being treated in pretty much the same way as they always were under the Consumer, Trader and Tenancy Tribunal Act.
That means that not much has changed. We said that things would change, but not much has changed. When the scheme offers insurance as a last resort, it is enormously important whether that part of the deal has worked properly. It is important to take the whole package into consideration, because one component affects another. The licensing of builders is also an important consideration. Yesterday I reported to the House that a builder about whom I used to complain, Rocco Vitalone, has finally lost his building licence, but for only 18 months. I cannot tell members what it would have cost the Department of Fair Trading to achieve that result. If that is an example of how rigorously the building industry is being supervised and pursued we are up against it!
I would like some detail from the Department of Fair Trading as to how effective its new regime, modest though it is, impacts on the building industry to make sure that the bad builders are being cleaned out. I have a feeling that the new regime might be about as effective as the consumer tenancy tribunal in changing things. I recognise that the change in the environment in the home building industry is difficult for consumers, it is hard work, and is something that I have been engaged in for some time. But changes needed to be implemented, and done so openly. For that reason, the Opposition does not oppose the bill, although I might have a different feeling. The Opposition certainly wants full, public disclosure of all aspects of the bill and an opportunity for all the parties who are concerned to come before an upper House committee and to inform it how the bill will work. In addition, we want the opportunity to interview members of the Department of Fair Trading and the Fair Trading Tribunal and have them tell us their story.
Reverend the Hon. FRED NILE [4.32 p.m.]: The Christian Democratic Party supports the Home Building Amendment (Insurance) Bill. We acknowledge that there has been limited time to consider the bill, but we recognise that this is basically a rescue package in an emergency situation. The bill contains a number of reforms that were announced by the New South Wales and Victorian governments on 13 March. The reforms were urgently agreed upon by both governments and were worked through with the insurance companies. That resulted in this bill being introduced into Parliament. It is recognised that all insurance areas, including workers compensation and motor vehicle accidents, are complicated. Discussing those matters with insurance companies and obtaining actuarial reports takes some time. Some members may think that this bill should have been introduced some months ago, but the complex nature of insurance involves a lot of negotiation and discussions before a final agreement can be reached.
As we all know, an emergency situation followed the terrorist attacks, initially in New York on September 11 which resulted in the destruction of the Twin Towers of the World Trade Center. That involved billions of dollars of insurance coverage. I understand that extra billions of dollars are needed for the restoration of the site so that it can be used for new buildings. That destruction hit the world's insurance industry like an earthquake, because all policies are tied together through reinsurance, and so on. The collapse of HIH Insurance also affected the insurance industry. The inquiry into that collapse regularly features on the front pages of our newspapers. We are all staggered at how some of the decisions were made involving FAI insurance and other companies, which appeared not to have a basis in reality. FAI and HIH provided a lot of building industry insurance, and it has been said that their rates were too cheap and that is part of why they became bankrupt. That may or may not be the case. Extra pressure was applied after 11 April when Dexta announced that it would not provide any further cover in the home building insurance area.
Other insurance companies are under threat, although some are seeking co-operation from other insurance companies, because they can just walk away from insurance areas. The uncertainty and risks do not warrant some companies being involved in certain areas, and we could finish up with no insurance companies providing insurance in a particular area. I wonder whether the GIO should have remained as a government agency because, as the Hon. John Ryan hinted, in this area of uncertainty with high premiums, and insurance companies professing that they have financial problems, they in fact have larger profits. No-one really knows. If the GIO were still in operation, a comparison could be made on the risks, premiums and payouts with private insurance companies. The Government must keep insurance companies involved in this area, and provide some guarantees of capping payments. That is now occurring in every area, following the large awards in some areas. This bill will provide that the amount of cover for defective work will remain at $200,000. That is a key aspect of the legislation. That amount will include cover for such reasonable legal and other costs as may be incurred by the claimant in seeking to recover compensation from the contract.
The bill provides the following reforms: home owners will be able to claim against their policy as a last resort—that is, where the builder is dead, has disappeared or is insolvent; and insurance will cover structural defects for six years and non-structural works for two years. I can understand the need for a time limit but the majority of new home buyers, especially young married couples, take out a mortgage for 25 years. Their insurance will cover structural defects for up to six years only. The bill provides for claims relating to incomplete work to be limited to 20 per cent of the contract price for the work; alternative indemnity schemes and other arrangements may be approved. I note that the Government has left an option which is important, although it does not provide for a Government insurance office but is providing some opportunity for the Government to work in partnership with insurance companies. The bill contains an enabling provision under which, if appropriate, the Building Insurers Guarantee Corporation may be used as a vehicle to administer any reinsurance or other arrangements which may be put in place by the Government.
I support the referral of the bill to the Standing Committee on Law and Justice for review. A condition of the referral was that the bill be proclaimed and enacted, otherwise insurance companies might think we have given them one thing in one hand and taken it from them in the other. The only danger is that some of the amendments may drastically change the basis of the reform package. If the law and justice committee recommends any amendments I hope they will not cause insurance companies to pull out of the agreement. I have had this discussion in other committees in which I am involved, particularly as it relates to workers compensation. These things are very sensitive and when an agreement is reached on a certain basis even the slightest drift in another direction could change the whole basis on which actuaries assess the risk. The law and justice committee must bear that in mind when it reviews the legislation. Any amendments should be delayed to allow the legislation to operate for, perhaps, 12 months. We will not solve the problem if we start chopping around and present a half-hearted situation. We support the bill as part of a rescue package. We recognise the atmosphere of urgency and, therefore, accept the short notice on which the bill was presented to both Houses.
The Hon. IAN COHEN [4.42 p.m.]: I have a degree of concern about the bill. I have listened with interest to other honourable members. The report from my assistant who is looking into the matter is that people are shocked that the legislation is being debated today. There was very little time to discuss it and people are not aware of exactly what is going on. We rang the Building Assessment Review Group [BARG]. Mrs Irene Onorati burst into tears when she realised that the legislation was in this House today. I concur with the overwhelming amount of material that the Hon. John Ryan put before the House. I have been listening and talking to people from BARG for some time. They have been in the Parliament and visited various honourable members. It is an honest group of people. It is tragic to think that these people are the victims of events such as September 11 and the collapse of HIH.
Corporate irresponsibility is encouraged by governments of both persuasions. We often hear about the waste and the resultant crash as a result of too many parties, too much luxury, too much irresponsibility and lack of accountability of the organisation. This massive collapse is now reverberating throughout the community. It is tragic that vulnerable people who set out to make the major investment of their lives, to build or renovate their homes, are held to ransom by private insurance companies in concert with this Government. Certainly, things have turned full circle, and it is a sad state of affairs. How did we ever lose the Government Insurance Office? How did we ever lose the Commonwealth Bank from public ownership? This is the sort of thing that comes back to haunt us.
When private enterprises take over where do they shaft the responsibility? They are slashing their benefits. It is absolutely devastating. It is appalling. It is like Faulty Towers, but that is Parliament and that is how we are working. It is sad to note that the bill has come through the Department of Fair Trading. I agree that it is appropriate to send the bill to the Standing Committee on Law and Justice, but it is too little too late. The HIH collapse and September 11 were the beginning of the collapse of the home warranty insurance scheme. Before HIH collapsed there were five insurers. It was then reduced to four: Dexta, Reward, Royal and Sun Alliance, and HIA.
Earlier this year Dexta, which insures around half the industry, announced it was pulling out of writing policies for a high-rise project. Later it announced it was pulling out of the home building sector altogether because its European re-insurers, which had underwritten the commercial risks, no longer wanted a stake in the Australian market. The company would honour its 6,300 New South Wales policies, but would write no more. What does this mean at a practical level for builders and consumers? First, builders insurance premiums have risen dramatically, and they are facing more onerous conditions. One builder said his premiums have risen threefold, from $500 to more than $1,700. Another builder paid an insurance premium of $5,000 and got around $7.5 million in cover.
Last year the same builder was told that he would get only $2.5 million and he would have to provide a $500,000 bank guarantee. Many builders are being told that they have to put their personal assets and homes on the line to gain insurance. Some builders have stopped working altogether, others are building illegally without insurance. As building works come to a standstill, builders are laying off staff and subcontractors. Many jobs are being lost. More than 200,000 construction jobs are at risk and up to $9 billion in home-building work is under threat. However, there are some very negative aspects for consumers in the legislation. Under the old system when you sign a contract with a builder for a new house or renovations worth more than $5,000 the builder must have home warranty insurance.
A person can make a claim if there is any problem with the building work, including contractual problems and the death, bankruptcy or disappearance of the builder. A person can claim for up to seven years after the job is completed and a maximum of $200,000. Under the new system the Government is stepping in as a guarantor, an insurer of last resort. It is acting as the re-insurer to ensure that companies such as Dexta stay in the market. However, there will be significant reduction to consumer rights. For example, the insurance will cover structural defects for only six years and non-structural defects for two years, claims relating to incomplete work will be permitted to 20 per cent of the contract price of work and the threshold is reduced from $5,000 to $12,000, which will eliminate small claims. Thus, for work under $12,000 no insurance will be necessary. The last resort provisions are introduced only where insurance is triggered if the builder is dead, is insolvent or has disappeared and, therefore, is unable to complete or rectify building work.
On the one hand, builders must have home warranty insurance. Yet insurance companies either will not insure them or will force them to put their homes and assets on the line, to lay off employees and to cancel subcontract work. On the other hand, consumers rights will be significantly reduced. It is a no-win situation, and insurance companies, which are concerned about profits, seem to be leading the charge and driving the situation. As I said earlier, this is another area where the economic rationalists hold sway. Everyone is regarded as a figure and a sum of money. The present situation provides an opportunity for the Treasurer, with his ample funds in Treasury, to consider buying back the insurance companies and recreating the Government Insurance Office. This is a classic case of the Government kowtowing to the insurance industry. Yet again people are suffering and members of this House are virtually powerless to do anything about it.
The Hon. Dr ARTHUR CHESTERFIELD-EVANS [4.50 p.m.]: I speak against this disappointing bill. If we were to look for a reason for the attitude of young people in Australia to politics and the fact that people generally consider this House as irrelevant, we could not find a better example than this bill. The Government has created a poorly regulated industry. It gave away its insurance company and is no longer a player in the market. We are now dictated to by reinsurance companies in Zurich. Such companies affect the behaviour of insurance companies in New South Wales, and the Government tamely goes along. In this globalised world, the people who regard this House as irrelevant would also regard the New South Wales Government, with its economic rationalism over a period of years, as irrelevant. As was pointed out by the fool in King Lear, one has as much power as one takes and if one gives away one's power then one no longer has any. The stopgap measures in this bill—which interestingly does not have a sunset clause—are a logical conclusion to the Government's previous actions and inactions, which were often supported by the Opposition.
I congratulate the Hon. John Ryan on his excellent speech. The Hon. John Ryan does not set Coalition policy. More is the pity. He is more than welcome to become a member of the Australian Democrats. He is the sort of person we need—and I do not say that to many people. He understands the building industry and the problems of home builders who are affected by the building industry and building insurance in New South Wales. He has seen the heartache of people who have been affected by building problems. Notwithstanding the silly interjections from the Government, the House should be dealing with the issues he raised. Our job is to look after the citizens of New South Wales. Reverend the Hon. Fred Nile and the Hon. Ian Cohen spoke about the Government giving away the GIO. If the Government is a player in the market, it can dictate to the market. It sets a price that enables it to continue trading in a solvent manner and with a reasonable margin. Other players will have to meet that price, which will then pull down the market to a level that is reasonable for consumers.
If a government-run system is marginally inefficient, perhaps that inefficiency will correspond with the profit levels of more optimally managed companies and the two can coexist. I believe that is how the system worked previously, until the Government decided it could make more profit and raised its premiums to the level of the market. Effectively it created a private company. The Government was not content with having a lower profit margin but also the capacity to control the market by reigning in profits. It wanted to kill the goose that laid the golden egg. It wanted to make a quick buck and "away we go". The problems in the insurance and the banking sectors are the result of the economic rationalist perspective of the short-term dollar overlooking the long-term obligation to the people of New South Wales. The Australian people have been ripped off as governments divest themselves of their concern for consumers. Governments assume that the market, which often is an oligopoly, will look after consumers.
The problem in the building industry is also an example of what happens in a poorly regulated market. The lack of a proper inspection and builder exclusion systems means that plenty of shonky buildings are being built. Many high-rise towers in the city do not comply with fire regulations because the inspection system was privatised by this House, against the advice of the Australian Democrats. Dare I say, we told you so! We told the Government and the Opposition that privatisation would result in a poor inspection system. Now there are high-rise towers in the city, which are occupied, that do not meet fire regulations and do not have council approval. I have asked for a list of such buildings. Although I have not yet received a response to that request, since my request the Council of the City of Sydney has prosecuted Meriton for non-compliance of some of its buildings. Perhaps the council thought it would look foolish if it provided a list of those buildings, which have been occupied for some time but do not comply, but did not take any action. I do not know if I can claim credit for that action, but I would not be surprised if that were the case. Perhaps the council would have acted anyway because attention had been drawn to the number of buildings that did not comply since the introduction of the private inspection system.
Poor building accreditation systems have resulted in a great deal of claims, which have then pushed up the cost of premiums. There is also the human suffering associated with shonky builders, builders abandoning houses half way through the building process, buildings being completed and then found to be structurally unsound. Who pays for the demolition and rebuilding? Often the house owners cannot prove their cases and never get their money back. They lose their entire life savings and use all their earnings to pay off mortgages. And marriages and families suffer as a result.
All the problems are blamed on the collapse of HIH Insurance and the terrorist attacks on the United States of America. Because a plane flew into a building in America we cannot get insurance in New South Wales. The cost of public liability premiums has risen exponentially in every facet of Australian life. In any sort of rational framework one could not seriously believe that a plane flying into the World Trade Center in New York would change the likelihood of a builder doing a shonky job in Western Sydney. That is not a logical cause and effect. If cool heads were running the insurance companies the premiums would reflect the costs involved and the likelihood of problems occurring in New South Wales.
If the GIO were a functioning unit that was managed by the Government as a company that earned a reasonable return for a reasonable risk, I believe that the terrorism that occurred in New York would not have affected the reinsurance industry here in New South Wales. However, the industry worldwide has not sorted out its response to the September 11 act of terrorism. Australia is 2 per cent of the world market and because the reinsurers were unsure of what to do they have simply put their premiums up generically. The companies in Australia have then left the market because those raised premiums have squeezed their margins. Those who understood what was happening in Australia would have realised that the risk of losing money because of the actions of builders had not substantially changed. Therefore, if there was a large backer, such as the New South Wales Government, the reinsurers would be able to accept the risk knowing the cost structure of the premium.
I believe this crisis has been caused by the sale of the GIO and the extraordinary haste with which all the large parties in Australia have embraced economic rationalism and flogged off assets that they should not have flogged off. Another major factor has been the lack of a meaningful regulatory system, and this has allowed claims to rise. The same situation applied at the time of the sale of the Commonwealth Bank, which was set up during the Depression to stop banks profiteering but which was sold off for a quick buck. Everyone complains about banks, which, funnily enough, make huge profits.
The Hon. John Della Bosca: It was set up after the war.
The Hon. Dr ARTHUR CHESTERFIELD-EVANS: That is historically correct but, nevertheless, it was set up in order to have a player in the market so that the profit level could be looked at in the light of public interest. In a sense this situation runs parallel to the workers compensation system in which we have, on world standards, poor prevention but high injury rates and poor case management by WorkCover. The Government's solution is not to fix the other two problems but to decrease benefits.
The Hon. John Della Bosca: We have increased benefits.
The Hon. Dr ARTHUR CHESTERFIELD-EVANS: That is complete nonsense and the Minister knows it. The Minister has increased benefits for the few who get through the selection process of his absurd AMA guidelines, but the net payout has dropped. The Minister introduced those guidelines. Self-insurers in workers compensation continue to perform at 30 per cent to 50 per cent of the WorkCover premiums, thus proving what can be done with competent case management, yet even that example is ignored. The building industry also experiences poor enforcement of regulations. Many claims are made because of shonky buildings, resulting in higher premiums. As we do not have any companies we are at the mercy of reinsurers in Zurich, who do not look closely at what is happening in Australia. Therefore, the solution has been to cut benefits.
I have not spoken directly to Irene Onorati, who either the Hon. Ian Cohen or the Hon. Richard Jones described as being in tears once again. Through the Building Action Review Group she has struggled to get a better deal for people who have been ripped off. My office receives considerable correspondence each week from people in desperate circumstances seeking to recoup their money or seeking some redress from dodgy builders. This bill is an attempt to ensure that the three companies that provide home warranty insurance in New South Wales, Dexta, Royal and Sun Alliance and Reward, will not leave the market as this would have an adverse effect on the home building industry, which contributes $8 billion per quarter to the national economy and employs 710,000 people. Currently, despite all the gloom with insurance, the home building industry is booming, partly because of low interest rates—although because of this problem some people are not building.
In order to placate the insurance industry, on 17 April the Government announced that it will effectively underwrite the industry for what some insiders conservatively estimate will be $10 million of taxpayers money, as reported in an article in the Sydney Morning Herald of 17 April entitled "Taxpayers to prop up home insurers". The bill will implement a new warranty scheme for residential building works and the supply of kit homes entered into at the commencement of the Act. The conditions of warranties currently in force will be unaffected. However, contracts entered into after the commencement of this Act will be subject to the new scheme.
The details in the second reading speech are very sketchy, and that is of concern. We have been told this legislation must be passed because of pressure from the insurance industry. Indeed, the insurance industry has assured the Government that everything will be okay. More detail on this subject has been provided in adjournment speeches than was given in the second reading speech of the Minister in the other place. The bill limits the period of home building insurance cover for structural defects from seven years to six years. It makes provision for home warranty companies to cap liability for non-compliance with contractual obligations at 20 per cent of the original contract price. I consider that cap and the $200,000 limit to be a bit tight. Indeed, a person who was building a large house has said, "We would rather not take out that insurance but put the money into supervision or legal aid when the contract is first drawn up and I think we will be better off."
Clearly, the bill is merely a bandaid measure. If the legislation is urgent, why does the bill not contain a sunset clause? I note that an amendment will be moved to refer the bill to the Standing Committee on Law and Justice. I should have thought it would have been preferable to have it referred to a legislation committee before it was enacted. It is rather like putting the cart before the horse. Once again, this is legislation on the run, but this Government does many things on the run. It is another example of why the Government does not deserve the respect of the people. It has not considered the matter in the long term. Rather than bite the bullet and put in place a regulatory system and an insurance company that is effective in the market, in a crisis the Government has bowed to this powerful lobby group. I have no choice but to oppose the bill—and I do not say that with any joy. I would have preferred to say that the matter has been managed competently and that this is good legislation that will benefit the community. However, that is not the case and, therefore, I oppose the bill.
The Hon. Dr PETER WONG [5.08 p.m.]: We all know too well, with the collapse of HIH and the events of September 11, that the insurance landscape has been altered forever, and the home warranty insurance industry is very much affected by this new landscape. This bill is the Government's response to concerns that home warranty insurers may not be able to continue offering insurance to home builders. Dexta, one of only three home warranty insurers in Australia, has already withdrawn from the market. The concern that I have is the speed at which this bill has been rammed through the House. I do not dispute the importance of the issue; however, legislation on the run, regardless of how good the intention may be, might ultimately result in bad legislation.
We need to consult widely, and from the debate so far it seems there has been extensive consultation with insurance companies but limited consultation with consumer groups, which are very much affected by this legislation. Indeed, this bill seeks to support home warranty insurers by limiting consumer rights and entitlements. My major concern is that this legislation will limit claims relating to incomplete work to 20 per cent of the contract price for the work. I am sure most members of this House would have heard nightmare stories from families affected by what can only be described as dodgy builders.
However, we are considering limiting claims to just 20 per cent for unfinished work. At present consumers are covered for structural and non-structural defects for up to seven years but this legislation seeks to reduce the cover to six years for structural defects and to just two years for non-structural defects. How can we think this through? The bill passed through the other House only yesterday and we are now being asked to pass it in this place today. Are we moving too quickly? The Minister said in his second reading speech in the other place that the bill was necessary but then offered little substance in support of his argument.
Crossbench members have not been briefed about the rationale for many of the measures in the bill. For example, how did the Government arrive at the 20 per cent claim limit for incomplete work? Why does the bill introduce structural and non-structural components to the cover? Why is cover for non-structural defects reduced from seven to two years? Why not four or five years? The Government is asking us to trust it but it has not provided sufficient information to support its argument. The Government's main argument seems to be, "If you don't support this bill the industry may collapse into a crisis." However, I am concerned about consumers. As I said earlier, I believe making policy on the run is dangerous. However, making policy on the run without comprehensive consultation with all groups affected is even more dangerous. Without the Government's rationale for why it has moved in this direction and how it has arrived at the limit provisions in the bill, it would be irresponsible to pass this legislation. For those reasons I oppose the bill.
The Hon. RICHARD JONES [5.11 p.m.]: I am unable to indicate whether I support or oppose the Home Building Amendment (Insurance) Bill as I have not had the chance to gather any information about it. I contacted various organisations such as the Public Interest Advocacy Centre, the Sydney Building Information Centre, the Home Seekers Co-operative Housing Society and the Building Action Review Group. Irene Onorati said she had not received a copy of the bill, which she thought was despicable. She said, "There's no-one to look after us and I'm broken-hearted they don't consult with us. Please don't let it pass until we've had a chance to look at it." That will not happen because the bill will be passed this afternoon.
I have been advised by Julie Heraghty that this legislation is similar to the package that was announced in March and is not as troublesome as we feared. However, we need more time to look at the details of the legislation and to consult the people whom we normally consult. I am disappointed that the bill has been rushed through Parliament so rapidly and that we are not able to judge its likely impact and whether it is the same as the package announced in March. I will not oppose the bill, but I hope that the Standing Committee on Law and Justice will examine it closely and that people such as Irene Onorati will ask many questions in relation to it. I hope that the legislation will have no unforeseen consequences, but at the moment I simply do not know.
The Hon. JOHN DELLA BOSCA (Special Minister of State, Minister for Industrial Relations, Assistant Treasurer, Minister Assisting the Premier on Public Sector Management, and Minister Assisting the Premier for the Central Coast) [5.12 p.m.], in reply: I thank honourable members who have contributed to the debate, especially those who accepted that this legislation is urgent—although that is not an easy path to take politically. I assure honourable members that the commitments and undertakings given by the Minister to community representatives and to members of this and the other place will be upheld. I commend the bill to the House.
Motion agreed to.
Bill read a second time.
Third Reading
The Hon. JOHN DELLA BOSCA (Special Minister of State, Minister for Industrial Relations, Assistant Treasurer, Minister Assisting the Premier on Public Sector Management, and Minister Assisting the Premier for the Central Coast) [5.13 p.m.]: I move:
That this bill be now read a third time.
The Hon. JOHN JOBLING [5.15 p.m.]: I move:
That the question be amended by the addition of the following paragraphs:
2. That the provisions of the Home Building Amendment (Insurance) Bill, as passed by the House, be referred to the Standing Committee on Law and Justice for inquiry and report, together with the impact of the bill on:
a) home warranty insurance,
b) home builders,
c) consumers.
3. That the Committee report by Thursday 5 September 2002.
4. The reference of this bill to the Standing Committee on Law and Justice is in no way intended to constrain the commencement of the bill at an earlier date.
Amendment agreed to.
Motion as amended agreed to.
Bill read a third time.
Last modified 05/12/2007 16:37:28 : Update this page