Potential building industry collapse under PI pressure
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Currently the Queensland Government is yet to fully resolve the issue of unobtainable professional indemnity (PI) insurance for private building certifiers. Private building certifiers legally require PI insurance to practise, which includes issuing building approvals, completing inspections and issuing final certificates. Failure to secure PI insurance means private building certifiers are unable to practise and building projects cannot commence or be finalised resulting in business closures and unemployment within the construction sector.
The Queensland Government has been aware of this problem and its consequences for some 18 months through discussions with the Australian Institute of Building Surveyors (AIBS) with the matter being raised publicly in an article by Andrew Wallace Federal Member for Fisher dated 26 June 2019. In this article it was pointed that the Queensland Government should resolve the issue of the unavailability of exclusion-free PI insurance policies by changing the legislation to accept non-combustible cladding exclusion clauses within PI insurance policies to prevent a disastrous impact on the local building industry. In early July, the Queensland Government changed the legislation to accept non-combustible cladding exclusion clauses in PI insurance policies for private building certifiers.
What the Queensland Government and Federal Government fail to recognise and understand is the continued exit from the insurance market of insurers prepared to provide cover to building certifiers. The limited number of insurers who remain in the market now operate under extremely stringent guidelines which dictate who they will insure, based on the type of work certified (houses and carports vs apartment buildings etc.), company age, prior claims history and annual turnover. With a significantly contracted and more stringent market, building certifiers are struggling to obtain PI insurance and those successful in obtaining PI insurance face unworkable increases in premiums and excesses of up to 500%. As an example, a sole trader building certifier who previously paid $20,000 for insurance and a $10,000 excess for any claim must now pay $120,000 for insurance and $60,000 for any claim. How many other small businesses could withstand such extreme increases?
The failure to secure PI insurance, either outright or at a manageable cost has now resulted in a number of private building certifiers being forced to consider closing their businesses, creating undesired effects on their professional standing and their livelihood. More importantly, it should be emphasised that without building certification, building approvals or final certificates, building projects cannot commence onsite or be finalised. This creates an undesirable knock-on effect of delays or non-starts onsite and delays or non-final payment for builders and all trades and professions within the construction industry such as concretors, surveyors, carpenters, bricklayers, plumbers, electricians, cabinet makers etc. At this time, for whatever reason, this matter has been “swept under the carpet”. It is now time for action. The Queensland Government must act conclusively or face a possible recession in the Queensland construction industry.
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