Australian insurance providers are under rising pressure amidst calls for them to help rectify the combustible cladding crisis.
After the recent discovery of severe defects in multiple apartment buildings, the Victorian Cladding Taskforce has suggested insurers contribute funds towards their repair. They believe that, by addressing the issue now, insurance providers will reduce their exposure to future claims involving the flammable cladding. The Victorian government are, for this reason, adamant that a positive contribution from both parties will achieve a mutually beneficial outcome.
The Insurance Council of Australian (ICA), however, believes that insurers are not responsible for the compensation and rectification costs of the disaster. Instead, they have proposed that those who caused the issues should be held accountable. The ICA argues that insurers did not build, certify or have any input in the construction of the affected buildings and, thus, have no direct obligation to resolve the crisis.
The Impact of this Issue on Insurance Premiums
Since the identification of these severe defects, insurance premiums for surveyors, engineers and architects have increased significantly. In some cases, professional indemnity insurance is now costing individuals up to 500% more than prior to the cladding crisis. Often, these premiums also include broad exclusions that aim to minimise the exposure of insurers.
Those impacted by the soaring costs and growing list of restrictions believe that to combat this financial burden, they will need to pay their staff less and charge more for their product or service. Helen Lochhead, the national president of the Australian Institute of Architects, stated that those who struggle to afford these rising premiums might even be forced to close.
While, in one case, owners of an affected Melbourne apartment building were awarded more than $5.7 million, such action is not always possible. Numerous companies involved in the construction of impacted buildings were purely created to complete that particular project and, after its conclusion, ceased to exist. Investigations are ongoing and, until a viable solution has been found, unit owners will be prohibited from selling their apartments.
The flammable cladding crisis is still yet to be resolved and, to protect the Australian construction industry, swift government action is crucial. The Victorian government have announced that they will be contributing $600 million towards fixing buildings across the state that contain the cladding. In the past five years, owners of affected Sydney buildings have also collectively received at least $30 million.
Obtaining the appropriate insurance for your needs should be a priority. By speaking with an insurance professional, you can ensure you are aware of risks in your industry and keep up to date with the latest risk management strategies. A qualified broker can also help you accurately define which questions to ask in uncertain circumstances and can act on your behalf when dealing with insurers.
If you have any queries relating to your building’s cladding or your other insurances, don’t hesitate to get in touch with your insurance advisor.
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