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Reform of the Home Building Compensation Fund 

Public consultation now closed 

What's this about?

The Home Building Compensation Fund (HBCF) provides a safety net for consumers if their builder or contractor cannot complete residential building work or fix defective work due to insolvency, death, disappearance or licence suspension for failure to comply with a court or tribunal money order. It also covers subsequent owners of a property for up to 6 years. Since 1 July 2002, over 4,800 claims have been made with payouts averaging $64,800 per claim.

By law, builders or contractors must buy HBCF insurance for each residential building project in NSW valued over $20,000 and the average insurance premium cost is currently $1,447. There are exemptions for multi-unit constructions above three storeys high and some other special cases.

The NSW Government has been the sole provider of HBCF insurance since 2010, which was formerly called ‘Home Warranty Insurance’, however some people may also call it ‘home owners warranty insurance’, ‘builders warranty insurance’, or ‘builders indemnity insurance’. The fund is currently marketed under the name ‘icare™ hbcf’.

What has happened so far? 

In December 2015, we released the Discussion Paper: Reform of the Home Building Compensation Fund, to invite public comment on the future of the HBCF in NSW.

The Discussion Paper canvassed a range of reform options aimed at ensuring the HBCF achieves financial sustainability so that it can continue to fulfil its consumer protection role in the future.

The potential options covered operational and administrative changes to the HBCF, as well as changes to the builder licensing system that are linked to the HBCF.

The Discussion Paper also suggested five broad reform models that combine the potential reform options in different ways:

Model 1 – Retain the current scheme, reduce administration costs and raise premiums
Model 2 – Reduce the scheme’s coverage
Model 3 – Combine reduced scheme coverage and raised premiums
Model 4 – Move to a voluntary insurance scheme
Model 5 – Combine a voluntary and mandatory scheme.

The public consultation closed on Friday, 12 February 2016.


View the submissions received in response to the public consultation on the reform of the Home Building Compensation Fund.

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