Shrinking NSW Home Owners Warranty Insurance

Since I’ve been focusing on strata building defects more recently, it occurs to me that I should demonstrate the incredible shrinking NSW Home Owners Warranty Insurance scheme.

Since the introduction of privatised HOW Insurance on 1 May 1997, it’s started shrinking so that it covers less and less every few years and it’s confusing to almost everyone.

To start with there’s been 5 distinct versions of HOW in 15 years.

• HOW Mk 1 which applied from 1 May 1997 and 30 June 2002
• HOW Mk 2 which applied from 1 July 2002 and 30 December 2003
• HOW Mk 3 which applied from 31 December 2003 to 1 March 2007
• HOW Mk 4 which applied from 1 March 2007 to 19 May 2009
• HOW Mk 5 which applied from 19 May 2009 onwards

When you analyse how key features of Home Owners Warranty insurance operate under the different versions you’ll see that most things have gotten worse and not much is better.

HOW Features	Mk 1	Mk 2	Mk 3	Mk 4	Mk 5
Cover (per dwelling)	$200,000	$200,000	$200,000	$300,000	$300,000
First/Last Resort *	First Resort	Last Resort	Last Resort	Last Resort	Last Resort
Claim Time Limit General Defects	7 years	2 years	2 years	2 years	2 years
Claim Time Limit Structural Defect	7 years	6 years	6 years	6 years	6 years
Notification Time Limit	12 months	12 months	6 months	6 months	6 months
Over 3 Storeys	Covered	Covered	Excluded	Excluded	Excluded
Claim Reduction for Delays	No	No	No	No	Yes
Claim Reduction for Not Enforcing Warranties	No	No	No	No	Yes
Claim Reduction for Not Maintaining	No	No	No	No	Yes

So, we started by getting $200,000 cover per dwelling for up to 7 years on all defects in all buildings without needing to sue the builder (or anyone else first) 

And now we’re getting $300,000 cover per dwelling only in buildings under 3 storeys for 2 or 6 years (depending on the defect), provided notice was given to the insurer within 6 months but only after taking legal action against the builder to the point where the builder become insolvent or bankrupt and then subject to possible reductions for delays, failures to exercise warranties and failures to maintain.

It’s a sad story for strata apartment owners of shrinking consumer protections over the quality of building work and more people need to speak up and try to get things improved.

Francesco …

*  A first resort HOW insurance policy means that owners can make a claim directly with the insurer, without having to pursue legal actions against anyone else first.  A last resort HOW insurance policy means that owners must exhaust all avenues against the builder until the builder dies, disappears or becomes insolvent or bankrupt before making a claim with the insurer.