Victorian homeowners report struggles with state-run building insurance scheme

Victorian homeowners report struggles with state-run building insurance scheme | Insurance Business Australia

Property

Victorian homeowners report struggles with state-run building insurance scheme

Authority accused of using intimidation tactics

Property

By
Roxanne Libatique

Australians Siddarth Prakash and Chetna Mahadik anticipated support from Victoria’s state-run domestic building insurer when their builder went bankrupt and left the country in 2020. Instead, they describe the experience as a “nightmare.”

According to ABC’s report, Prakash and Mahadik’s inner-city home remains unfinished five years after construction began.

The Victorian Managed Insurance Authority (VMIA) offers domestic building insurance in Victoria to cover project completion and some defect remediation when builders go bust.

Numerous families have accused VMIA of pushing them to accept the lowest-cost replacement builders, leading to additional distress and substantial out-of-pocket expenses to address defects. Some claimed that dealing with VMIA was even more challenging than the collapse of their builders.

Victorian homeowners’ concerns over low-cost quotes

Homeowners claimed that VMIA forces them to accept the lowest quotes to complete their projects or risk losing their insurance payout, but these quotes often fail to cover all the defects left by the original builders.

Prakash and Mahadik sourced quotes from builders to finish their home after filing a claim with VMIA. The VMIA also provided a quote from its preferred builder, which was $250,000 less than the quotes the couple obtained. The preferred builder claimed the work could be completed within the original budget, negating the need for an insurance payout.

Prakash noted that the builders he consulted performed thorough audits and found significant defects with the slab and building frame, while the VMIA’s builder spent only 30 minutes onsite. Despite their concerns, the couple had no choice but to sign on with the VMIA’s preferred builder. As work progressed, additional defects were uncovered, which the VMIA allegedly covered, but the builder eventually terminated the contract.

The VMIA stated that homeowners are not required to use its preferred builder but warned that it would only pay the amount its nominated builder would have charged.

Victorian homeowners accuse VMIA of using intimidation tactics

The VMIA has faced a significant influx of claims following the collapse of major builders, recently announcing a premium hike of more than 50%.

Many families have reported feeling intimidated by the VMIA’s use of legal tactics, with some too afraid to speak on the record for fear of affecting their claims, the report claimed.

Prakash and Mahadik, now living with Prakash’s parents and their children, have borrowed hundreds of thousands of dollars to continue their project. They believe the situation could have been avoided if the VMIA had heeded their concerns about the low-cost quote.

Other families have shared similar experiences. Following the collapse of Porter Davis, Jared and Shontel Ford were forced to use Simonds Homes to finish their home due to the lowest quote requirement.

The Fords’ incomplete home was left with numerous defects, including warped walls and uneven floors. Their legal challenge against the VMIA claims that the authority’s offer did not cover all defects, resulting in financial and emotional strain.

The VMIA told ABC that it “is focused on completing homes for claimants as quickly as possible to the standard they signed up for with their original builder.”

Call for VMIA’s transparency and accountability

Shadow Housing Minister Evan Mulholland has called for greater transparency and respect for distressed homeowners.

“I think it’s a form of bullying,” he said, as reported by ABC. “The best form of medicine for this government and the VMIA should actually be transparency, accountability, honesty, and people coming forward telling their experience.”

A government spokesperson emphasised that the VMIA is expected to prioritise getting homeowners into their homes quickly, using trustworthy builders. They added that non-disparagement clauses are sometimes used to encourage good faith negotiations in complex cases. Families who feel mistreated can lodge complaints with VCAT, though some have reported that the tribunal is plagued by delays and is unaffordable.

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