The NSW home warranty insurance scheme commenced in 1972 and operated as a government administered scheme until 1997:
The reports of the Royal Commission into the Building Industry (1992) and the Inquiry into the Building Services Corporation (1993) recommended a move to a private scheme.
The Government accepted the recommendations and the scheme was privatised on 1 May 1997:
On 15 March 2001, HIH Casualty and General Insurance Limited and FAI General Insurance Company Limited, holding approximately 40% of the home warranty insurance market, were placed into liquidation. During 2001 and 2002, all insurance markets in Australia and overseas were in turmoil and a number of insurers and reinsurers withdrew from the home warranty market.
In response to the turmoil, the NSW and Victorian Governments introduced a range of reforms from 1 July 2002, including moving from a 'first resort' to 'last resort' scheme. As a last resort scheme, cover is provided in the event of the death, insolvency or disappearance of the builder.
On 30 September 2003 the final report of the NSW Home Warranty Insurance Inquiry found that home warranty insurance should continue to be provided by the private sector on a ‘last resort’ basis and made seven recommendations for reform to ensure transparency, accountability and accessibility to the scheme, as well as affordability to builders and the level of protection provided to homeowners.
The Inquiry’s recommendations also included the formation of a Home Warranty Insurance Scheme Board, the removal of cover for high-rise buildings and the introduction of mandatory market practice guidelines for insurers.
Advice to the Government from the Home Warranty Insurance Scheme Board indicated that a substantial contraction of the market had occurred following the Global Financial Crisis with a number of insurers subsequently leaving the market during 2009.
In late 2009 the Government announced major structural reforms to the Home Warranty Insurance Scheme in New South Wales that will safeguard building industry jobs and better protect home owners.
The new Scheme commenced on 1 July 2010 and is managed by NSW Treasury through the Self Insurance Corporation, and operated by QBE Insurance (Australia) Limited and Calliden Insurance Limited as insurance agents for the Government–underwritten home warranty insurance scheme. More information is available on the home warranty insurance fund website at www.homewarranty.nsw.gov.au.
The home warranty insurance scheme is just one part of an overall consumer protection regime for home owners having building work undertaken in NSW. Recent enhancements to this regime include: