Halo Guarantees Limited update

Since joining the Halo Guarantees Limited (HGL) team in August last year, I’m pleased to share we have made solid progress towards HGL becoming a fully self-sustaining business; future proofing the Halo 10-Year Residential Guarantee for New Zealand Certified Builders (NZCB) and its members’ clients.

So, how are we tracking?

H Backlogs have been cleared, a new cloud-based technology system has been implemented, and robust processes have been defined and put into practice. This has resulted in a substantial increase in the number of Guarantees being issued each month.

H A new actuary has been appointed, and claims reserving increased from 25% of net revenue to 64.4%. We now have over $750,000 reserved to pay claims compared to less than $100,000 last August. This is steadily increasing in proportion to our revenue.

H New pricing was implemented from 1 June 2023 to ensure we collect adequate income for our Guarantee risk exposure.

H An in-house Claims process has been documented and established.

H Financial projections are positive with the company expected to become profitable by 2024.

H The business was recapitalised in July, meaning the balance sheet now supports all current and future Guarantee liabilities.

H A fit for purpose investment strategy was implemented in June to grow premium and claims reserves to help achieve long term profitability.

Halo refresher

H The Halo Guarantee is not insurance, which is essentially a contract that pays out to the insured on the occurrence of an event, i.e., an insurance contract is a “first response”. Instead, through the Guarantee, HGL acts as guarantor to homeowners over members’ statutory warranties to clients under the Building and Consumer Guarantees Acts. HGL will only ever pay a claim if you have delivered defective work under the contract and have failed to meet your statutory obligations to your clients to put it right. Put simply, the Guarantee is not the first response; you are.

H The Guarantee is for the sole benefit of homeowners should you fail to meet your obligations to rectify materials and/or workmanship defects (first two years only) or structural defects (full 10 years).

H The Guarantee provides financial peace of mind for clients that HGL stands behind you and acts as a point of difference for you as a NZCB member with exclusive access to a marketleading building guarantee.

H Your role in the application process is to offer the Guarantee and apply on behalf of the homeowner and pass on the Guarantee fees to us. You are not a party to the Guarantee contract (just as HGL is not a party to the building contract), but you play an important part in its offer and acceptance by the homeowner.

Claims

At the time of writing, we have 23 claims registered, with five closed and 18 open. One claim has been accepted so far with an estimated $13,000 total cost to be paid from the claims reserve. Other claims are still in process with homeowners and members.

With the sharp increase in the number of Guarantees issued, we will at some point see a corresponding increase in the number of potential claims notified to us. Ultimately, this is what HGL is here for: to fix covered defects for the homeowner should members fail to do so for any reason.

The claims process is designed to provide members with plenty of opportunity to ‘do the right thing’, because that is the best possible outcome for all concerned. However, it is critical that HGL always supports and upholds the integrity, credibility, and reputation of NZCB and its members, and it’s at claim time where the rubber meets the road. Where individual members fail to meet their obligations, HGL must come through as promised. We will always take a fair and balanced approach to claims, but where a member is in the wrong, we will act swiftly and decisively in the best interests of our customer, the homeowner, to put things right for them.

This also means we must take a ‘zero tolerance’ approach with members who don’t uphold NZCB’s values and expectations as the leading residential builders’ association in New Zealand. This is why, if HGL steps in to meet a members’ obligations for them, we will make no apology for taking one or more of the following actions:

H Refer the member to NZCB for a review of membership eligibility.

H Refuse to offer a Halo Guarantee on future projects that the member is involved with.

H Hold the member liable for our claims costs and seek recovery from them.

New onboarding process

It’s fair to say that the current application process could be better. NZCB Toolshed applications come through sometimes before the homeowner is ready to apply, we don’t receive all the information we need, and it can create more admin than we all need.

We are moving to a more proactive online submission process. If you use the NZCB Toolshed building contracts, you will select whether the homeowner wants to apply for a Guarantee or not as you do currently. If you select “yes”, you will receive an email link to a pre-populated online application, which you can then complete and submit when you are ready to start the project.

If you’re using a hard copy NZCB contract or a non-NZCB contract, you will find the link to the application where the PDF application form currently lives. You simply need to complete and submit the online form.

We are hoping to “go live’’ by late August once our developer has completed a few remaining fixes for us. We’ll let you know when it’s ready to go.

Product changes

As mentioned in the June/July magazine, a full product refresh is underway to amend and update the Guarantee to ensure it remains fit for purpose and is clearly understood by homeowners and NZCB members. This is expected to be completed by November and we’ll keep you updated between now and then.

Any questions?

Please don’t hesitate to contact me directly or get in touch with the team on 0800 141 490 or hello@halo.nz. We’re here to help!

David Lee Halo Guarantees Limited Chief Executive