Premium

Premium Changes

What is the HBCF?

HBCF (Home Building Compensation Fund) insurance is required to be obtained by licensed builders for all residential construction projects over $20,000. The scheme provides a safety net for homeowners with certain residential building projects should the builder be unable to complete their obligations due to insolvency, death or disappearance. The safety net is also provided where the builder's licence is suspended for failure to comply with a Tribunal or Court order to pay compensation to the homeowner. The Fund provides insurance for the period of construction and up to six years following completion. HBCF has been administered by the NSW State Government since 2010 following the withdrawal of the previous private insurers and due to premium income not covering claims expenditure.

What is the change to premium pricing?

In November 2016 the NSW Government announced it would return the fund to a fully funded premium over the next two years. The Government also announced it would introduce a builder risk-based premium for more equitable premiums to builders and that each type of construction would be assigned a base premium rate based on the claims data.

How does risk-based pricing work?

The actuarial analysis of the HBCF insurance claims data undertaken by icare has identified that some characteristics of builders have a potential to increase the incidence of insolvency during the up to eight year exposure of the Fund. These characteristics are weighted for each builder to provide the risk-based premium loading or discount which is then applied against the base premium for the type of work being undertaken. For example, the actuarial analysis has found that where a building entity is structured as a corporation (company) can have a significant impact on the propensity for claims. This is reflected in the premium icare charges. Other attributes taken into account as part of the risk-based approach include the period the entity has been licensed, retained (adjusted) net tangible assets and net profit.

The Pricing Calculator provided, can assist homeowners identify the base rate for their project. Each builder has been allocated an individual loading or discount to the base premium. The loading/discount is based on the builder’s insurance risk profile as assessed using actuarial guidelines and are not a reflection of the quality of their work as a building contractor.

When does this change happen?

The first premium change took place on 3 April, 2017. A second change becomes active on Monday 2 October, 2017. There will be further premium increases in 2018 subject to approval from SIRA. icare hbcf will communicate 2018 increases once approved.

Is there a minimum premium?

A minimum premium of $200 applies to all projects. A 10% GST and a 9% stamp duty are applicable to HBCF premiums.

Where the contract price for a residential construction project is not known, the reasonable market cost of the labour and materials involved in the project is used to calculate the applicable premium.

Premium rates effective from 3 April 2017

The following premium rates apply to all Certificates of Insurance (CoI) issued.

Construction type Metro Rural
  Excl GST
and stamp duty
Incl GST
and stamp duty *
Excl GST
and stamp duty
Incl GST
and stamp duty*
C01 New Single Dwelling Construction 0.63% 0.76% 0.51% 0.61%
C02 Multiple Dwelling Alterations/Additions - Structural 0.58% 0.69% 0.46% 0.55%
C03 New Multiple Dwelling Construction (<= 3 storeys) 1.32% 1.58% 1.06% 1.27%
C04 Single Dwelling Alterations/Additions - Structural 0.58% 0.69% 0.46% 0.55%
C05 Swimming Pools 0.66% 0.79% 0.53% 0.63%
C06 Single Dwelling Renovations - Non Structural 0.34% 0.40% 0.27% 0.32%
C07 Other 0.34% 0.40% 0.27% 0.32%
C08 Multiple Dwellings Renovations - Non Structural 0.34% 0.40% 0.27% 0.32%
C09 New Duplex, Dual Occupancy, Triplex and/or Terrace (attached) Construction 1.32% 1.58% 1.06% 1.27%

* Provided as a guide - the pricing calculator may provide a varying value due to rounding issues.

Premium rates up to 3 April 2017

The following premium rates apply to all Certificates of Insurance (CoI) issued prior to 3 April, 2017.  These rates no longer apply and are included for historical reference only.

Construction type                                        Metro                                 Rural
  Excluding GST
and stamp duty
Including GST
and stamp duty *
Excluding GST
and stamp duty
Including GST
and stamp duty*
C01 New Single Dwelling Construction 0.60% 0.72% 0.48% 0.58%
C02 Multiple Dwelling Alterations/Additions - Structural 0.90% 1.08% 0.72% 0.86%
C03 New Multiple Dwelling Construction (<= 3 storeys) 0.90% 1.08% 0.72% 0.86%
C04 Single Dwelling Alterations/Additions - Structural 0.90% 1.08% 0.72% 0.86%
C05 Swimming Pools 0.90% 1.08% 0.72% 0.86%
C06 Single Dwelling Renovations - Non Structural 0.63% 0.76% 0.50% 0.60%
C07 Other 0.90% 1.08% 0.72% 0.86%
C08 Multiple Dwellings Renovations - Non Structural 0.63% 0.76% 0.50% 0.60%
C09 New Duplex, Dual Occupancy, Triplex and/or Terrace (attached) Construction 0.90% 1.08% 0.72% 0.86%
Provided as a guide - the pricing calculator may provide a varying value due to rounding issues.

Premium rates effective from 2 Oct 2017

The following premium rates will apply to all Certificates of Insurance issued after 2 October 2017

Construction type Metro Rural
  Excluding GST
and stamp duty
Including GST
and stamp duty *
Excluding GST
and stamp duty
Including GST
and stamp duty*
C01 New Single Dwelling Construction 0.66% 0.80% 0.53% 0.64%
C02 Multiple Dwelling Alterations/Additions - Structural 0.58% 0.69% 0.46% 0.55%
C03 New Multiple Dwelling Construction (<= 3 storeys) 1.72% 2.06% 1.37% 1.65%
C04 Single Dwelling Alterations/Additions - Structural 0.58% 0.69% 0.46% 0.55%
C05 Swimming Pools 0.66% 0.79% 0.53% 0.63%
C06 Single Dwelling Renovations - Non Structural 0.34% 0.40% 0.27% 0.32%
C07 Other 0.34% 0.40% 0.27% 0.32%
C08 Multiple Dwellings Renovations - Non Structural 0.34% 0.40% 0.27% 0.32%
C09 New Duplex, Dual Occupancy, Triplex and/or Terrace (attached) Construction 1.72% 2.06% 1.37% 1.65%

* Provided as a guide - the pricing calculator may provide a varying value due to rounding issues.

Construction Types

C01 New Single Dwelling Construction 

The rates in this category cover new constructions of a house, including the addition of a granny flat or secondary dwelling to an existing dwelling.

C02 Multiple Dwellings Alterations/Additions - Structural 

The rates in this category cover structural alterations/additions to existing blocks of units, flats, apartments etc. (any number of storeys) and existing duplexes, triplexes, terraces, villas, townhouses etc. (other than where the work is being undertaken exclusively within one dwelling and does not involve common property – in which case category C04 applies). 
 
A policy is issued for the project with an individual Certificate of Insurance issued for each dwelling where the average is more than $20,000 per dwelling (i.e. contract price divided by number of dwellings).

C03 New Multiple Dwellings Construction 

The rates will cover construction projects of new multiple dwellings (three storeys or less), e.g. blocks of units, flats etc.
 
A policy is issued for the project with an individual Certificate of Insurance issued for each dwelling.  
 
This category does not include the construction of free-standing dwellings on individual sites without any shared services or structural components (e.g. common walls, roofing etc.) other than developments which are intended to be subject to strata and/or community title on occupation. 
 
Refer to C09 New Duplex, Dual Occupancy, Triplex and/or Terrace (attached) construction not intended to be subject to strata and/or community title on occupation.

C04 Single Dwelling alterations/Additions- Structural

The rates in this category cover for work involving structural alterations/additions to an existing single dwelling (including such work undertaken exclusively to one dwelling within a block of units, flats, apartments etc. or to one dwelling forming part of a duplex, dual occupancy, triplex, terrace, townhouse etc. complex which does not involve common property).

C05 Swimming Pools 

The rates in this category cover the following types of pool construction/work:
  • New In-ground Concrete
  • New In-ground Fibreglass
  • New In-ground Vinyl Lined
  • New Above Ground
  • New Pool Inside dwelling
  • Alterations/Repair to existing Pool
  • New Spa

C06 Single Dwelling Renovations- Non structural

The rates in this category cover work involving non-structural renovations to an existing single dwelling (including such work undertaken exclusively to one dwelling within a block of units, flats, apartments etc. or to one dwelling forming part of a duplex, dual occupancy, triplex, terrace, townhouse etc. complex which does not involve common property).  
 
This category may include contracts for the following structural work types, which for premium purposes are priced as non-structural renovations even though a six (6) year period of insurance may apply under the hbcf policy: 
  • the erection of prefabricated patios, garages and sheds 
  • bathroom and kitchen renovations that may include projects involving window replacement and water proofing membranes
  • replacement of roof coverings without alteration to roof structure
  • timber decks (including timber slatted balconies) and pergolas 
  • landscaping – where retaining walls do not exceed 25% of the contract price
  • driveways and other paving 
  • solar panels 
  • swimming pool servicing, renovation and minor repair projects.
The C06 category also covers specialist contractors (e.g. electricians, plumbers, gasfitters, and air conditioning installers) and single trade projects involving single dwellings.

C07 Other

Other - Specialist single-trade projects or not included in other definitions due to unusual circumstances. 
 
When a building contractor specify this construction type in the policy submission or when using the pricing calculator, it will prompt to specify if the building is single or multi-dwelling.

C08 Multiple Dwelling Renovations – Non structural

The rates in this category cover work involving non-structural renovations to existing blocks of units, flats, apartments etc. (any number of storeys) and existing duplexes, triplexes, terraces, villas, townhouses etc. (other than where the work is being undertaken exclusively within one dwelling and does not involve common property – in which case category C06 applies). 
 
A policy is issued for the project with an individual Certificate of Insurance issued for each dwelling where the average is more than $20,000 per dwelling (i.e. contract price divided by number of dwellings). 
 
The C08 category also covers specialist contractors (e.g. electricians, plumbers, gasfitters, and air conditioning installers) and single trade projects involving multiple dwellings.

C09 New Duplex, Dual Occupancy, Triplex and/or Terrace (attached) Construction

The rates in this category cover work involving the construction of a new duplex, dual occupancy, triplex &/or terrace/town house (attached).
 
This category covers the construction of a new single dwelling with a granny flat. A policy is issued for each dwelling. 
 
Refer to C03 category for developments which are intended to be subject to strata and/or community title on occupation.

Risk-Based Pricing 

The introduction of risk-based pricing provides a fairer pricing for builders because lower risk builders receive more equitable outcomes and transparency under the new reforms. Each builder has been assigned a risk based premium discount or loading, and was informed of their allocation in a letter from icare in January 2017. 
 
Builders that are not subject to annual review are assessed based on: 1) the period that the licensed building entity has held their building licence and 2) the structure of the building entity.
 
All reviewed builders are presented with the same criteria during their review. Up to eight pricing factors are considered in determining their risk profile. A discount or loading, capped at +/- 30%, is then applied to the base rate premium.
 
These eight factors have been determined through analysis of HBCF claims experience.

Time entity licence held

This is the period that the licensed building entity has held their building licence.  

Business structure 

This is the structure of the building entity that holds the building licence. The options are: sole trader, partnership, or company.

Adjusted net tangible assets (ANTA) in entity 

A builder’s Adjusted Net Tangible Assets (ANTA) value represents the net ‘fire sale’ position of tangible assets less third party liabilities. Please refer to the ANTA Factsheet.

Net profit before tax or taxable income 

An entity’s Net Profit is the value arrived by subtracting cost of sales and operating expenses from the revenue.

Adverse trading history 

A builder is considered to have an adverse trading history if any of the following events has occurred:  previous insolvencies, past HBCF claims, builder licence suspension/cancellation/fines/penalties, outstanding NCAT/Court orders, and unresolved complaints/disputes/loss notifications.

Reviews not current 

Reviews are scheduled on a regular basis to assess a builders continuing suitability to apply for a Certificate of Insurance. Failure to participate in scheduled reviews affects builder’s risk profile.

BCRP participation 

The Building Contract Review Program (BCRP) aims to assist new entrants to the building industry, as well as existing small to medium builders without demonstrated experience for proposed projects, to have an opportunity to obtain experience in pricing and project management.

Audited Accounts 

The builder has submitted prior year end audited accounts for audit by external accountants. The most recent year end account will subjected to external audit.

Removal of distributor commissions

Since 3 April, 2017, icare hbcf no longer pays distributor commissions. Government paid broker commission is considered an unnecessary cost for a mandatory monopoly product. This change will bring the icare hbcf in line with the icare’s Workers Insurance Scheme which does not pay broker commission in addition to the fee they charge from their clients.
 
Brokers have adopted a fee-for-service model where they charge builders with competitively set fees. Builders are not expected to pay a higher cost due to this change in commissions to their brokers. The broker's fee will be separate to the premium paid for HBCF insurance and brokers will decide how much they charge for their services independently. It is a matter between the broker and their builder clients.