JMG Building Surveyors CEO John Massey has urged Prime Minister Scott Morrison to resolve what he says is a national crisis concerning professional indemnity insurance. Massey notes that insurance companies are offering private building certifiers coverage with exclusions for cladding and other dangerous materials, but that companies such as his cannot operate without being fully covered by insurance. Firms like his would be forced out of business under such circumstances, which would lead to the construction industry collapsing. From The Australian:
Mr Massey said certifiers were concerned that state governments were responding to skyrocketing insurance premiums with legislation to allow policy exclusions in the mistaken belief “this will somehow make the problem disappear”.
“I am sorry to inform you that it will not,” he told Mr Morrison…
Some building firms are already threatening to stop work on all projects involving cladding until the crisis is solved…
“Indeed, without a workable solution on the table very soon, I believe the building and construction industry throughout Australia will eventually collapse.”
As I noted yesterday, insurance premiums for professional indemnity reflect the risk that the professional will make an error for which they will be sued. And the increased number of building cracks and problems reflects failure on the part of anyone whose job it was to certify the soundness of said buildings. Hence, higher premiums.
A taxpayer bail-out of professional indemnity insurance is merely a can-kick and won’t fix the underlying problems pervading the construction industry.
Instead, the federal government needs to launch a warts-and-all royal commission into construction processes, standards and regulations to determine the true causes of the faults, finger those responsible, and provide recommendations on how to prevent a reoccurrence in the future.
