Claims to a taxpayer-funded housing insurance scheme were plagued by poor communication and a lack of transparency, leaving some to experience a “double catastrophe”.
In a report tabled in Victorian parliament on Wednesday 3 December, the state ombudsman exposed delays with the Victorian Managed Insurance Authority’s handling of claims following the collapse of multiple major building companies.
The government authority manages domestic building insurance claims when a builder is unable to finish the works due to insolvency.
About 1700 properties across Victoria and Queensland were left in limbo when Porter Davis went into liquidation in March 2023.
One of those customers was Eric Poon, who purchased land in Lilydale and engaged Porter Davis to build his home.
Mr Poon told Star Mail in April 2023 that he was relieved by the government’s decision to set up a compensation scheme, but that in the more than two years since, it’s been an expensive and emotionally challenging exercise.
“My home is now finally completed. I ended up finding another builder to finish the job, and with the Victorian Government’s bailout, I was able to recover about five per cent of what I originally paid to Porter Davis,” he said.
“The whole experience was still very costly and quite unfair. Porter Davis hadn’t taken out the required DBI (Domestic Building Insurance), and because that wasn’t picked up earlier, many of us were left to deal with the consequences. I also feel it was unfair to taxpayers, who ended up covering something that shouldn’t have happened in the first place.”
While glad his house was able to be finished, Mr Poon said it was “far more expensive and difficult” than he expected.
“If everything had worked the way it should, my build would’ve been much cheaper. Instead, the delays and the rise in material costs meant I paid around $100,000 more than planned.
“I had already bought the land and was paying the mortgage during all of this, so the delays also meant paying a lot more interest — especially with the RBA raising rates 13 times in 2023. It was a double hit financially. I also had to redo permits and deal with extra admin, which made the process even more stressful.”
While the taxpayer-funded scheme achieved a reasonable outcome for most home owners, Ombudsman Marlo Baragwanath found there were issues with its processes, especially with complex claims.
“One home owner described their experience as a ‘double catastrophe’ – first the collapse of their builder, and then their experience with (the authority),” Ms Baragwanath said.
“Home ownership is an aspiration for many Victorians – so it’s critical that there are fair systems and processes in place to enable people to realise that ambition.”
Most Porter Davis home owners didn’t face unreasonable delays on claims but those that did endured serious personal and financial hardship.
The authority should have exercised discretion within the bounds of its policies to achieve fair and timely outcomes for home owners, the ombudsman said.
The public service watchdog also said the body’s dispute-handling processes and practices met obligations but it wasn’t always fair and reasonable.
The report handed down nine recommendations, centred on improving the processes for managing domestic building insurance, strengthening communication with home owners and increasing overall transparency.
Victoria’s new Building and Plumbing Commission and the Department of Transport and Planning accepted the recommendations in principle.
More than 120 submissions, 260 complaints and 46 claims were received by the ombudsman.
About 560 Porter Davis clients were not covered under the scheme despite paying the construction giant before it collapsed, forcing the state government to set up a separate $15 million rescue package.
Under Victorian laws enacted in 2024, builders who fail to take out domestic building insurance face a fine of up to $96,000 for individuals and $480,000 for companies.
