GENERAL PROPERTY

PII for certifiers – industry needs to step up

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THE professional indemnity insurance problem in Australia, particularly for certifiers, has been a result of ineffective oversight and lack of uniform government policy across the country, and the response cannot simply be more of the same.

According to RICS, the hardening of the local market for PII has been driven by commercial factors and that insurers are generally no less concerned about a lack of certainty, confidence and effective mitigations to reduce exposure than any other business.

RICS said any solution to the PII problem must therefore address the factors contributing to contraction including a lack of (government) policy certainty, uniformity across the Federation, data transparency and industry support.

“Looking at the last few decades, it’s logical to conclude that compliance and enforcement issues in building and construction have occurred under the complexity of the complex co-regulatory environment overseen by the states and territories,” RICS Australasia, South East Asia and Japan managing director Chris Nicholl said.

“And so, to the extent that the PII problem has been a result of ineffective oversight, the response cannot simply be more of the same,” he added.

To highlight the different approaches adopted, recently the Queensland government joined New South Wales and South Australia in allowing certifiers to operate with PII featuring cladding related exclusions after the only insurer, Landmark Underwriting, that offered exclusion free PII stopped providing cover as of July 02. However, QLD Minister for Housing and Public Works Mick de Brenni said this is only a temporary solution to the PII crisis and he called for a national approach.

At the same time, the QLD government followed in the footsteps of NSW and Victoria in banning the use of combustible cladding on all new buildings in the state.

In contrast, Victorian Premier Daniel Andrews hinted that the state government could step in as insurer of last resort.

Meanwhile the NSW government has promised to conduct the biggest shake-up of the construction industry in response to Opal and Mascot towers incidents, and will require building practitioners, including designers, architects and engineers be registered. Minister for Better Regulation and Innovation Kevin Anderson said the proposal is the first in-depth look at reforming the building and construction industry as part of the Building Stronger Foundations discussion paper.

He said the discussion paper aims to deliver greater transparency, accountability and quality of work in the sector.

RICS Australasia head of policy and strategy Benjamin McDonald said Australian governments are not the sole agent responsible for, or indeed capable of, legitimately maintaining a reasonable level of professional behaviour through regulation.

McDonald said negative public sentiment toward professional conduct has been fuelled by recent building failures such as Grenfell in the UK and the Opal, Lacrosse, Neo and Mascot towers in Australia.

“Whilst insurers have been withdrawing capacity over several years for commercial reasons, these largely unrelated events have only amplified uncertainty and perceived claims exposure, and therefore contraction.

“Other perceived or real contributing factors we have noted include: lack of industry led mitigations; lack of clarity, uniformity and co-ordination in policy responses of States and Territories; lack of data transparency and/or knowledge sharing; and ineffective government led regulation,”

McDonald said the ultimate site of action and accountability is clearly at the level of the individual and so it makes sense for the property industry bodies to step up and help governments achieve greater compliance.

“This is especially the case where there is a net public interest benefit in terms of industry responsiveness, opportunity cost and overall effectiveness,” he said.

“Therefore, absent any solutions to address some or all of these challenges, we anticipate there is reasonable likelihood that the insurance market may continue to harden. Further, as policies come up for renewal, we expect a constriction in the supply of competent and accredited certifiers willing and able to undertake work on buildings affected with ACP.” McDonald said.

RICS is hosting a major all-day conference on 1st August in Sydney to explore these challenges. It will feature a Q&A panel with three of the state regulators and brings together stakeholders in the property sector.

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