Domestic building insurance premiums at ‘appropriate levels’

The main provider of domestic building insurance for Victoria is setting premiums that effectively cover expenses, risks and long-term claim costs, according to the state regulator.

The Victorian Managed Insurance Authority is the main provider of domestic building insurance which covers homeowners for defects if their builder dies, disappears or goes out of business.

In its biennial assessment, the Essential Services Commission’s Domestic Building Insurance Premium Validation Review 2016–2018 found the VMIA’s premiums are viable.

In its review, the commission found the VMIA’s:

• Domestic building insurance premiums are sufficient. The report found premiums are at sufficient levels to cover expenses, risks and long-term claim costs. It found while claim costs increased between 1 July 2016 and 30 June 2018, the costs associated with handling and administering claims (expenses) declined significantly.
• Premium coverage is not excessive. The report found premiums are reasonable and not set above the level required to cover expenses, risks and long-term claims costs. The VMIA decreased its premiums by 22.5 per cent on 1 July 2017 due to expected large cost savings from its new multi-agent distribution model.
• Underwriting standards conform to commercial standards. While the VMIA provides domestic building insurance to some builders it regards as 'higher-risk', it manages the additional risk by placing conditions on their eligibility.

Read the full report on the commission’s website.