Building projects halted as surveyors face rocketing insurance costs due to cladding crisis – ABC News

Posted December 13, 2019 05:36:50

Ryan O'Flynn is a man with a pool he isn't allowed to fill with water, because his building surveyor can't sign off on the project.

Mr O'Flynn, a Melbourne plumber, is just one of many people who had construction projects underway when building surveyors ran into insurance problems earlier this year.

Surveyors are having difficulty renewing their professional indemnity insurance because of the building industry's flammable cladding crisis.

In Mr O'Flynn's case, his safety fence needs to be inspected once it is complete, so he can then fill the pool he has built at his home at Ascot Vale, in Melbourne's north-west.

But his surveyor has pulled out of the project.

"We may not be able to swim in summer it is ridiculous, absolutely ridiculous," Mr O'Flynn said.

He said he was told by his surveyor that they had to change insurance policies during his pool build.

"Their excuse was that their insurance premiums have gone up so much that they had to make cuts on what [inspections] they could actually insure," he said

Philip Watt has a building surveying business in nearby Essendon and has been in the industry for 40 years.

Earlier this year he had to shut down his work for three weeks because he couldn't get professional indemnity insurance without any exemptions something insurers have become reluctant to offer surveyors.

For Mr Watt's clients, it caused all sorts of delays building their homes.

"They couldn't go past a mandatory inspection stage, so once they got to the end of the frame they couldn't go any further," he said.

In August a ministerial order was issued in Victoria, allowing surveyors to work with insurance even if it contained exclusions for non-compliant materials.

Similar moves were made in other states.

While that allowed surveyors like Mr Watt to return to work, it did not solve all of the profession's problems.

Mr Watt's insurance jumped by 800 per cent in a single year when he did find a new policy.

He said it had been usual for surveyors with small businesses to pay about $10,000 a year for professional indemnity insurance, but many are now paying close to $100,000.

Mr Watt's new insurance also comes with extra risks. His excess has jumped from $10,000 to $100,000.

"I don't think many businesses would sustain one or two claims of that amount it would certainly knock you around," he said.

The higher excess, and the associated risk, are affecting the kinds of projects his business will take on.

"There have been some projects we have not quoted, others we have been selective about how we have approached the project, because some projects are more risky than others," he said.

Mr Watt is now receiving calls from clients of a nearby surveyor who has been forced to close.

He said many surveyors were unwilling to take on projects that had already started, because they were worried they could become liable for the previous surveyor's work.

The Australian Institute of Building Surveyors (AIBS) surveyed 400 building surveyors across the country about the effects of changes to professional indemnity insurance on their businesses.

The AIBS said 11 per cent of building surveyors said they were no longer doing surveying work because of insurance issues.

A further 9 per cent of surveyors reported they had reduced the scope of work they would provide.

AIBS national president Troy Olds said the survey results revealed the scale of the industry's problems.

"It says we are in a crisis, and if 11 per cent of building surveyors are no longer able to work, we are starting to see the building industry no longer able to find professionals," he said.

The AIBS survey also found nearly 60 per cent of building surveyors had increased their fees to cope with rising insurance costs.

One surveyor wrote that he would be increasing his fees by 300 per cent next year to cover the additional insurance costs.

Mr Olds said he was aware of two firms that had taken on insurance premiums that they couldn't afford, just to stay in business.

He believes that trend will continue.

"It will get to the point where unrealistic insurance policies just won't be able to be taken and people will have to make the final decision to close their offices," he said.

Geelong builder Mark Little said it was becoming harder to find building surveyors.

"I am constantly getting calls from builders saying, 'Who did you use as a building surveyor?'" he said.

"It can create delays because of the volume of work getting pushed through to such small percentage of surveyors."

Federal Minister for Industry Karen Andrews will meet with her state counterparts on today to discuss surveyor insurance.

"Queensland and New South Wales have been leading work on possible solutions and this will be considered as a priority at Friday's Building Ministers Forum," Ms Andrews said.

"Insurers also need to step up and meet their existing obligations and lift their exclusions on professional indemnity insurance to ensure certifiers who are doing the right thing can continue to operate."

Both the insurers and the Victorian Government are calling for a national approach to resolving the insurance crisis.

Victorian Housing Minister Richard Wynne said the "only way to get real change is to deal with it a national level".

Insurance Council of Australia spokesman Campbell Fuller said there was still a crisis of confidence in the building and construction sector.

"It would be irresponsible and impractical for insurers to reassess their risk appetites and their products, including cladding-related exclusions on professional indemnity cover, based on promises and not nationally consistent action," he said.

Topics:insurance,building-and-construction,fires,melbourne-3000,moonee-ponds-3039,essendon-3040,geelong-3220

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Building projects halted as surveyors face rocketing insurance costs due to cladding crisis - ABC News