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Major Changes to Home Building Compensation Fund (HBCF) From 3 April 2017

Posted by LNA Master Landscapers Association on 15 March 2017

By law, Contractors must buy Home Building Compensation Fund (HBCF) Warranty Insurance for each residential building project valued over $20,000 for landscaping, single dwelling, duplex, dual occupancy, swimming pools, low-rise multi-units (less than four storeys) and high-rise multi-unit (four or more storeys) renovations, alterations & additions etc with certain projects exempted (e.g. new high-rise constructions).

Currently the HBCF Insurance has paid out $352 Million more than it has collected and the Government is making changes to bring it back into surplus.  In doing so they have also made changes so that Contractors whose work is substandard will bear the cost rather than being subsidised by quality Contractors.

On 3 April 2017 the following changes will occur:

  • Premium changes: The Base Premium will be set to achieve break-even point and cover claims and expenses. This subsidisation of premiums will be removed and over time premiums will be increased to ensure they meet the expected costs of future claims.
  • Cross subsidies between types of products will be removed: As an example, single dwelling premiums will no longer subsidise multi-unit premiums.
  • Builder risk will inform premium pricing: Risk Based premiums will be introduced. There will be a loading or discount to a maximum of 30% depending on the builder's risk profile
  • Broker commissions by Icare HBCF will be phased out: The guaranteed commissions currently paid to brokers by HBCF will be removed - removing 15% of the current cost of a policy.

Risk Based Premiums

The introduction of risk-based premiums means Contractors will be offered premium prices that reflect their business' individual level of risk and claims experience.  This will potentially reduce the subsidisation of higher-risk Contractors by their lower-risk counterparts.  It will also provide an incentive for Contractors to reduce their risk in return for lower insurance premiums, while providing better prices to homeowners.

Icare HBCF has sent personalised letters to all currently eligible Contractors, through their brokers, advising them the percentage increase or decrease based on their history.  If you find that the information included is incorrect or have any questions regarding the risk based pricing calculation, please contact your broker or LNA Gold Partner Nationwide Insurance Brokers (Tel: 9634 0900) immediately.

Contractors will be able to use the HBCF portal to view their eligibility limits, profile limits, policy limits, download certificates of eligibility and Insurance, lodge new policy applications and close open jobs.

Only accredited Insurance Brokers' roles will be to handle applications for eligibility, eligibility reviews and amendments, issue certificates of insurance and collect premiums on behalf of Icare HBCF. They will continue to charge Fees for these services.

Premium increases are effective from 3 April 2017 (percentage of contract price) further increases will apply after 2 October 2017.


Please note that where a scheduled eligibility review is 30 days or more overdue an assessment can be carried out, a further loading will be applied to the risk based premium loadings.

If you have any questions please do not hesitate to contact the LNA Team on 9630 4844.

Author: LNA Master Landscapers Association
Tags: Industry News

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