A new report shows average premiums are falling for insurance designed to cover homeowners for defects if their builder dies, disappears or goes out of business.
The Essential Services Commission report also shows the number of claims against the scheme remains low.
The commission’s head of price monitoring and regulation Marcus Crudden says average premiums fell from $1,089 to $825 between 2016 and 2018 after increasing steadily over several years.
'Average premiums increased by around 2 per cent each year from 2005 to 30 June 2018 in line with increasing project costs but have fallen over the past two years.
'This coincides with the Victorian Managed Insurance Authority establishing a new sales platform and new providers coming on board to offer this type of insurance,' he said.
The commission report shows 53 per cent of claims made to date relate to structural defects with the average cost of finalised claims around $33,000 per dwelling.
The report also shows:
the number of claims has stayed low with less than 1.5 per cent of certificates to date resulting in a claim*
the number of domestic building projects undertaken by registered builders has increased steadily since the scheme started but the number of owner builders has fallen
sixty-eight per cent of certificates issued in 2017 were for new dwellings (53,598 certificates out of a total of 78,391)
the total value of insured projects exceeded $19 billion in 2017.
Domestic building insurance scheme performance
Total and average premiums for registered builders, January 2005 to June 2018
Calendar year
Number of project certificates
Premiums
($m)
Average premium of a project certificate
Value of project certificates
($m)
Average project value
($000)
Average premium per $1000 project value
2005
42,556
27.4
$644
6,839
161
$4.01
2006
47,337
28.3
$598
8,035
170
$3.52
2007
50,574
27.3
$540
8,779
174
$3.11
2008
49,946
25.2
$504
8,954
179
$2.81
2009
58,525
32.0
$546
10,718
183
$2.98
2010
62,414
39.7
$636
12,195
195
$3.25
2011
59,256
42.3
$714
12,059
204
$3.51
2012
55,918
44.9
$804
10,917
195
$4.12
2013
59,055
52.9
$896
11,609
197
$4.56
2014
64,917
65.9
$1,015
13,828
213
$4.76
2015
69,247
73.9
$1,067
15,750
227
$4.69
2016
72,959
79.5
$1,089
17,657
242
$4.50
2017
78,391
73.8
$941
19,731
252
$3.74
2018 Jan-Jun
41,607
34.3
$825
10,453
251
$3.28
* Domestic building insurance claims data is not considered final for at least seven years as claims can be made for up to six years after building is completed. Therefore the number of claims from 2011 to now may still increase.
