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(EMAILWIRE.COM, March 28, 2013 ) San Francisco, CA -- The State government is preparing to underwrite a building industry following the QBE Insurance's decision to remove itself from the building indemnity insurance market.
The workings of the stop-gap solution are now uncertain after the Government backtracked on its original plan outlined by Finance Minister Michael O'Brien.
From July 1 when QBE cease to offer the builders' warranty insurance product, they'll act as an agent for the South Australian Government and effectively deliver an insurance product on our behalf for another 12 months, until we've determined where we want to go with this particular issue," Mr O'Brien told ABC radio.
Premier Jay Weatherill later denied an agreement had been reached with QBE, but guaranteed the Government would underwrite the industry.
"We are committed to make sure that this insurance will be provided, so in that sense if you're saying we're underwriting it then yes we're underwriting it," he said.
A collection of housing groups backed the plan to outline O'Brien, saying that it would buy time for the Government to negotiate a longer-term solution. Robert Harding, who is the HIA regional director for suggested that the Government ought to permanently take the place of other private insurers for better results.
"I certainly think the managed scheme that operates in Victoria and NSW seems to have operated reasonably successfully and has curtailed major premium increases," he said.
The QBE blamed an increased level of builder insolvencies for its decision to remove itself rom the market. The insurer's premiums on single homes jumped over 50% recently, while the State Budget is likely to come under considerable pressure following the market outlook.
"It costs the insurance companies a lot more money to administer a claim, which is highly documented and labour intensive. As it stands, it's clearly been shown from the insurance industry that it is not a profitable product," he said.
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Source: EmailWire.com
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