Distribution and Advocacy

The objectives of consistency and even-handedness for the NSW Home Warranty Insurance scheme provide a right for all Intermediaries to advocate on behalf of builders. It is the Insurance Agent’s responsibility to make decisions without any consideration of market pressures or broader intermediary relationships.

A key role of an Intermediary is to advocate on behalf of their clients. Appropriate advocacy will assist in an informed decision to be made by an Insurance Agent based on a complete submission as required under this Guideline. The Intermediary must disclose all matters material to the eligibility assessment in their possession and knowledge. This includes seeking approval for an elibilty profile that will represent the builder’s home warranty insurance requirements for the next 12 months (not for a lesser amount which will knowingly require increasing within the following twelve (12) months).

The Intermediary is required to communicate clearly and in a timely manner the HWIF’s requirements and decisions as well as assist in obtaining information that is necessary for a HWIF Insurance Agent to conduct risk assessments and to monitor and manage ongoing risks.

The Intermediary is to help minimise unnecessary disruption to projects due for commencement and identify such concerns to the Insurance Agent as appropriate.

Appropriate advocacy by Intermediaries does not include attempting to influence decisions of Insurance Agents on behalf of the HWIF by reference to the overall and/or particular business relationships between the Intermediary and Insurance Agent.

In providing communication to builder clients, including any requests for further information, the Intermediary should always ensure they have a clear understanding of the reasons behind the requirements in order to allow effective communication.

In order to carry out this function effectively and efficiently, an Intermediary is to be very familiar with the following:

• HWIF current published Underwriting Guidelines

• the requirements for new eligibilities, including documentation requirements and the minimum financial benchmarks

• the requirements for Periodic Eligibility Reviews, including frequency cycles and documentation requirements

• communications and directions made by the Insurance Agent or HWIF

• processes and requirements in issuing Certificates of Insurance.

During the actual assessment process, Insurance Agents are encouraged by the HWIF to deal directly with builders where clarity or further particulars are required The intent of direct communication is to ensure;

• decisions are made on the most contempary information

• time delays are minimised

• builders are given direct access to Insurance Agent staff completing the assessment.

As a courtesy Insurance Agents should copy the Intermediary into communications between the Agent and builders.

9.1 Reserving

Reserving is the term given when, if approached to insure the same business by two (2) or more different Intermediaries;

an insurer selects to provide a quotation to one of those Intermediaries exclusively. In those circumstances, the insurer has “Reserved” for the Intermediary to whom it elects exclusively to quote.

Although this Guideline is seeking to drive consistency, there may be circumstances where Intermediaries request Insurance Agents to ‘reserve’ if they do not wish their competitors to have access to the terms and conditions that the Insurance Agent provides.

The Insurance Agent is not to reserve terms and must provide terms to the Intermediary who is holding a current and valid letter of appointment or authority to seek terms from their builder client.

9.2 Credit Terms and Application of Premiums to Policies – Intermediary Responsibilities

The Insurance Agent will ensure that Intermediaries comply with the credit terms agreed in the HWIF template distribution agreement.

For the avoidance of doubt, where a Certificate of Insurance has been provided to any party, by any means, by the Intermediary, the premium must be remitted to the Insurance Agent by the Intermediary within the agreed credit terms.

The Intermediary must do this regardless of whether the Premium and Tax on Premium has in fact been received from the Builder or Owner-Builder by those dates.

Where an Intermediary has generated a certificate, without providng a copy to any party by any means, and the builder no longer requires it, the certificate is to be cancelled without formal cancellation procedures applying.

9.3 Change of Intermediary and Insurance Agent Protocol

A change in Intermediary or Insurance Agent will not alter the HWIF’s terms and conditions unless the builder provides additional information. Otherwise, common terms and conditions of Eligibility will continue to apply to the builder (including scheduled Eligibility reviews).

9.3.1 No Change of Insurance Agent

A Letter of Appointment (LoA) must be obtained and the Insurance Agent will advise the previous Intermediary of the new arrangement in writing. The new Intermediary must be provided with the Eligibility profile, conditions of Eligibility approval and any outstanding review requirements.

9.3.2 Change of Insurance Agent

A switch requiring a change in Insurance Agent

• will not be permitted where an assessment (i.e. new application, profile change request or a review) is in progress.

• will not be permitted where a special Eligibility review has been requested.

• may be permitted where a builder has not responded to a request for a periodic Eligibility provided the previous Eligibility review request is treated with urgency by the new agent.

An assessment by the holding agent is in progress (including a scheduled or special review, new application and profile change request) where:

• terms have been offered by the holding Insurance Agent but have not yet been met by the builder. The builder is required to meet the conditions before the switch can be implemented.

• the builder wishes to dispute terms that have been offered by the holding Insurance Agent. The builder is to escalate the decision to the holding Insurance Agent’s underwriting committee, and the issue required is to be resolved, prior to the switch being implemented.

• the builder has been offered and accepted terms from the holding agent and wishes to apply for an immediate change of those terms (e.g. increase in approved turnover, change in profile, change/removal of terms). The builder is to escalate the decision to the holding Insurance Agent’s underwriting committee, and the issue resolved, prior to the switch being implemented.

Where a builder is not satisfied with the outcome of the Insurance Agent’s underwriting committee process they are able to escalate the matter to the HWIF’s underwriting committee for further consideration.

Upon the HWIF approving the switch and providing BEAT access the new Insurance Agent is required to undertake an Eligibility review based on up to date financial statements (at least 6 months later than the latest assessed accounts).

An Eligibility review is not required where a builder has been reviewed by the original holding Insurance Agent within the prior 3 months based on up to date financial statements at the time of switching to the new Insurance Agent.

Once the switch is authorised the holding agent will cancel that builder’s Eligibility without notice.

9.3.3 Change of Insurance Agent for Common Directorships and Group Structures

It is the overriding intention of this section, without variance, that all businesses, where there is a key manager association (partner, director, licensed supervisor or shareholder), are to be assessed by the same Insurance Agent. The applicant must first cancel or switch the current Eligibility in order to apply through a different insurance agent where associated eligible entities or group structures are involved.

If there are related entities that are licensed in NSW or are on BEAT, then the application for any builder cannot proceed until:

• A group assessment must be concluded

• relevant deeds of indemnity are provided

• Insurance Agent has advised the HWIF of the outcome of the assessment.

It is absolutely critical to identify the related eligible entities and conduct group assessments through one Insurance Agent. Refer also to the section on “Group Trading Agreements”

9.3.4 Change of Insurance Agent for Major Builders

In order for major builders to switch Insurance Agents all of the most recent Eligibility review documentation, including up to date financial statements, must be provided to the new agent before the switch is authorised. If the broker has changed, a letter of appointment is also required.

Upon being provided access to BEAT by the HWIF, the new agent will be provided with:

• Most recent HWIF assessment that has already been conducted by the holding agent

• Last annual submission assessment

• Approved turnover

• Used turnover

• Project limits

• Outcome of the last financials assessed by the holding agent

• Conditions of Eligibility

• List of current projects on risk to allow management of run-off turnover

• Confirmation that the Eligibility is cancelled.

• All claims notifications

9.3.5 Builders Returning to Original Agent

If a builder was initially assessed by the original holding agent then, as required, the new agent must offer those same terms.

Where the builder wants to return to the original agent then again the terms initially provided will remain in place.

However, if the builder was re-assessed by the new agent on new up to date information then the most recent terms offered would apply in the event of the builder returning to the original agent.

9.3.6 Builders in the Building Contract Review Program (BCRP)

Where the original holding Insurance Agent has placed a builder in the BCRP, as a general condition of Eligibility, the same condition must be applied by the new agent. Should the builder want to have the condition removed following the switch the builder would need to demonstrate that they have completed a minimum of three projects as required in the BCRP – refer to the section of this Guideline on the BCRP dealing with periodic reviews of builders in the BCRP and exiting the Program.