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Home Warranty Insurance Bill |
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Thursday, 13 May 2010 |
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Mr MIKE BAIRD (Manly) [4.44 p.m.]: I support the shadow Minister and his work on the NSW Self Insurance Corporation Amendment (Home Warranty Insurance) Bill 2010. He has been an incredible source of knowledge and has provided great insight into the problems this industry faces. The Opposition understands that the object of the bill is to establish a new Self Insurance Corporation as the sole home warranty insurance provider in New South Wales. The home warranty insurance industry has been beset by problems. Private insurance companies have pulled out steadily and, as we understand, the scheme is now unviable. I will not reiterate concerns that have been expressed already by many members, but I shall focus on the particular point of the viability of the proposal. Obviously, the present scheme is unviable and there will be significant financial implications.
By its very nature the financial side of this industry was struggling. The Government has been quiet on the actual details of the scheme. The Opposition acknowledges the importance of the residential construction industry and, therefore, does not oppose the bill. We note the assurance from the Government that the bill will not reduce consumer protection in New South Wales. Although it is not exactly clear how that will be articulated, we take that assurance and rely on it. Questions remain particularly about the financial side. Residential work in New South Wales valued at more than $12,000 requires insurance. We are fast approaching the time frame within which this scheme needs to be in place.
With private insurance companies pulling out from the scheme we acknowledge that the Government must act and this bill is its attempt to resolve the problem. Many genuine concerns have been expressed about the way the Government has responded. Obviously, the time frame is critical. The object of the bill is self-evident. If this bill is not passed and the industry does not have a home warranty scheme in place, the construction industry is in jeopardy and, more broadly, the mums and dads at the end regarding the homes they hope to build.
My main focus is the financing of the scheme. The Government will spend $15.6 million to establish the scheme, but then it talks about any surplus in the fund being paid into the Consolidated Fund. I hope the scheme will not be viewed as another bottomless pit and then in a good financial year when premiums are unexpectedly low it is used as a dividend by any future government as a way to prop up budgets. That just does not make sense. This scheme needs to be set up properly for the long term and it must be sustainable. I ask the Parliamentary Secretary in reply to detail the expected financial implications of the scheme, particularly to the State budget. With the imminent State budget and the Government taking on these obligations, it is not unreasonable to expect that the Parliament be informed fully.
What are the expected total liabilities of this scheme? How will that flow through to the State if those liabilities are not met by the scheme? What is the level of expected payouts? What are the expected premiums? Will they increase or decrease with the scheme being introduced by the Government? They are all critical issues. The scheme is not just for the short term; we must understand the short-, medium- and long-term implications. It would be easy to put a scheme like this in place and then haphazardly decide that the administrator is happy to pay out in the short term without any long-term consideration for fund surpluses and then try to deliver end result. My main request is for the Parliamentary Secretary to inform the House in detail of the financial obligations of the scheme to the State. We cannot enter into obligations like this without every member of the House being fully informed.
I conclude my remarks by referring to a local builder who wrote to me about home warranty insurance. The letter states:
We have had a very tough 2 years with the GFC, on one project 20 of 23 payments were paid late because our clients finance was held up by the banks... I think there would be a bit more flexibility with the insurers to take on new clients if the State Government had done more... I can't understand how they are planning on getting a bill passed in government and then a workable scheme ready by the 30th June.
We seem to be a long way behind. Clearly builders require the support of the Government to be able to continue. During his reply the Parliamentary Secretary should provide an assurance to the Parliament that there will be a workable scheme in place by 1 July to maintain confidence and avoid a crisis. I reiterate that the Coalition seeks information on the financial implications for the State budget of the scheme and the nature of details that will be provided in the State budget on short-, medium- and long-term financial obligations. The Government should provide the members of the House with a true understanding of the full implications of taking on a home warranty insurance scheme and its inherent liabilities that will be borne by future generations.
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