Sounding the alarm: Insurance threat to NSW construction boom
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Sounding the alarm: Insurance threat to NSW construction boom

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Sounding the alarm: Insurance threat to NSW construction boom

March 14, 2019

The construction industry relies on the certification system to properly function – accredited certifiers, or building surveyors in other jurisdictions, perform the statutory role of providing building approvals. Without building surveyors and certifiers, projects can’t be approved, and the industry would eventually grind to a halt.

Housing construction has already peaked, and the fall will only be hastened without accredited certifiers playing their part.

Indeed, without certifiers, it’s not just residential developments that wouldn’t get off the ground, but new hospitals and schools.

In other words, the infrastructure construction pipeline, which it has been hoped would take up the slack of the declining residential sector, has also been threatened by the government’s failure to act.

This may seem alarmist, but this is a problem that has been steadily building for years. It’s a problem for all of us.

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At the centre of this problem is the ability, or inability, for certifiers to secure compliant professional indemnity (PI) insurance coverage.

Following increasing concerns around flammable cladding – off the back of the Lacrosse Tower fire and the tragic Grenfell Tower fire in London – insurance companies have become increasingly hesitant about offering PI insurance free of exclusions to certifiers.

For certifiers to secure and maintain their registration, the law in NSW (and in other states) stipulates that they must hold PI insurance policies free of exclusions.

The growing concerns around cladding, recent tribunal decisions and government inaction on auditing and making all players in the design and construction industry accountable combine to create an existential threat to certifiers.

This applies equally to private certifiers – which is most of the industry – and those working for local councils. Thiws also includes other engineering and design consultants in the construction process, like fire engineers.

A recent survey of AAC members found that 80 per cent of certifiers said they are extremely or very concerned over their future ability to obtain compliant insurance.

In simple terms, building surveyors that are accredited in different jurisdictions can’t have exclusions in their PI insurance policies. They must be covered for all eventualities.

If we can’t get clean insurance, it means we can’t qualify to be registered or renew our accreditation.

The problem doesn’t lie with the legislation – there are ample tight legal frameworks and regulations to testify to that – but the reluctance of government agencies to audit and police compliance as well as expand the accreditation system to designers, builders, contractors and engineers.

This is the problem: The state government is not doing what it is supposed to be doing. We’ve got all the laws but without the policing or accountability.

A more comprehensive auditing regime would address the concerns of insurers and weed out operators who aren’t doing the right thing.

Our industry wants to be audited. It wants to make sure everyone is accountable for what they’re doing.

Part of the problem is the extraordinarily broad remit of the Department of Fair Trading in NSW – responsible for everything from tattoo artists to financial services, and certifiers tacked on.

To their credit, both the government and Opposition have announced they will centralise responsibilities regarding the construction sector into one statutory body – this is a good first step, but like anything, how this operates in practice will be key. Its importance is not to be underestimated.

Fundamentally though, this is a problem that has festered for too long.

If these problems continue to grow it will be devastating for the construction industry – residential projects won’t be able to proceed, and key infrastructure projects will stall.

The NSW government has been hearing this consistently now for two years but has failed to act decisively.

Perhaps it will take the inability to certify one of their pet projects like new stadiums to get them to realise they are walking towards a construction crisis.

About the author

Robert Marinelli

Robert Marinelli

Robert Marinelli is the vice president of the Association of Accredited Certifiers.

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