No quick fix Sloppy work and complacent governments may have caused the construction industry crisis, but Bronwyn Weir says insurers have a big role to play in the renovation job By Bernice Han
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eetings of the Building Ministers’ Forum – which brings together Federal Industry Minister Karen Andrews and her state counterparts – have traditionally been low-key affairs. But the meeting in December was different. The construction industry is in crisis, thanks to insurers’ decision last year to get tough with a sector that many see as having been allowed to operate for far too long in a low-touch regulatory environment. It has resulted in a long list of buildings with serious defects, the most obvious of which is the use of non-compliant flammable cladding on thousands of buildings across the country. The whole sorry mess came to a head in July when UK-based insurer Landmark Underwriting, which had been providing Australia’s certifiers, surveyors and other building practitioners with restriction-free indemnity policies, bailed out of the market. The Landmark withdrawal brought to the forefront the scale of the defect issues in the construction industry. So serious are the problems that the remaining insurers offering professional indemnity (PI) cover for building professionals have taken a tough line. They have applied broad exclusions along with huge excesses and higher premiums, in
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many cases up more than 500%. In recent months they have also declined to provide indemnity cover for many types of commercial buildings, domestic swimming pools, wind farms and solar farms. The insurers’ actions caught the construction industry – and the Building Ministers Forum – napping. Having sat for a year on a report, Building Confidence, which was compiled by former senior bureaucrat Peter Shergold and industry regulation expert Bronwyn Weir, the ministers hastily dusted it off and agreed to support its key recommendations (see panel page 30). They also agreed to pursue further talks to remedy the crisis brought on by the insurers’ refusal to provide construction professionals with exemption-free PI cover, despite such policies being a requirement of their operating licences. The insurers’ stand is significant, because it has brought to the surface the many failings of the construction industry, the country’s third-biggest sector with an 8% share of GDP and annual revenues in excess of $350 billion. The ministers will meet with insurers soon to sort out the PI imbroglio. They said after the December meeting that their consultations with the Insurance Council of Australia (ICA) will “discuss a suite of
measures to reduce the cost and improve the availability” of PI to building practitioners. Their communique also acknowledged “there is more to be done” on top of what has already been promised over the course of last year as the building crisis deepened, when worsening wall cracks in the 132-unit Mascot Towers complex in Sydney forced residents out. Six months earlier, safety fears over structural defects in another Sydney building, Opal Towers, triggered a similar evacuation on Christmas Eve. Predictably, the idea of more talks and pledges to press on with the task of repairing the problem-plagued construction industry have not gone down well with the stakeholders, many of whom have voiced frustrations with the governments’ approach to the insurance issue. But Ms Weir sees it differently. She says it’s time to stop the cycle of negative talking and instead to be encouraged by what she believes is an “awful lot of momentum at the moment” to reform the industry. That the ministers plan to continue engaging with the insurers and other industry groups down the road should be seen as a positive, she tells Insurance News. “It’s good to keep talking about it and working through the issues,” she says in reference to the December communique
