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

IS this what happens when you pull apart a system … that whilst certainly imperfect … was, it seems, better at maintaining standards than what we have now?

WHY are Building Surveyers being singled out?

WHEN as the Four Corner program ‘Cracking Up’ revealed it was the replacement of Architects and Engineers for the system known as ‘Design and Construct’ where it all fell apart …

LET’s test this …

-Did we have circumstances like the Opal Tower before?

-Did we have circumstances like the Mascot Towers before?

-Did we have this volume of major building defects before?

-COULD it be we had standards, compliance and a built environment that wasn’t such a blatant failure as what we have now?

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

By Elise Kinsella

13 DECEMBER 2019

A picture of two tradesmen on a work site with concentre in the background. One man holds a dog.

PHOTO: Ryan O’Flynn (right), pictured with his dog and carpenter Simon Chatfield, needs to find a new surveyor to inspect his pool. (ABC News: Elise Kinsella)

RELATED STORY: ‘A huge crisis’: Building industry may grind to a halt over lack of cladding insurance

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.

Key points:

  • Building surveyors are facing skyrocketing insurance bills because of the flammable cladding crisis
  • A national survey shows nearly 60 per cent of surveyors said they had increased their fees
  • About 11 per cent said they were no longer doing surveying work because of insurance issues

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

States search for workarounds

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

A man in a business suit stands in front of building plans, inside a house being built, with wooden frames visible.

PHOTO: Philip Watt couldn’t work for three weeks earlier this year because of problems with his insurance. (ABC News: Elise Kinsella)

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.

A picture of a man in a business shirt, looking at plans, inside a house being built, with the frames visible.

PHOTO: Philip Watt says building permits are becoming more expensive, as surveyors deal with skyrocketing insurance premiums. (ABC News: Elise Kinsella)

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.

Looking down the side of a  Melbourne apartment building damaged by fire.

PHOTO: The use of flammable cladding on some buildings has led to surveyors struggling to find professional indemnity insurance. (Supplied: MFB)

“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.

‘No longer able to find professionals’

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.

Workers on a residential building site.

PHOTO: Building surveyors are responsible for ensuring construction projects are safe and comply with legal requirements. (ABC News)

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.

Harder to find a surveyor

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.”

A picture of the inside of a house, with glass doors looking onto a backyard.

PHOTO: Mark Little builds houses in Geelong and along the Surf Coast and says building permits are becoming more expensive. (Supplied: Little Constructions)

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.