All brokers must meet certain criteria to become an approved broker distributor of insurance with icare hbcf. hbc insurance is a complex insurance product that requires knowledge and expertise. Reforms announced in late 2016 mean that the hbcf no longer pays commission to approved broker distributors, instead they adopt fee-for-service arrangements.
What is an approved broker distributor
Insurance brokers are viewed as ‘licensed broker distributors’ of hbcf insurance.
From 1 October 2017, hbcf has a fixed panel of broker distributors selected based on an open tender process.
Eligibility Risk Managers
hbcf uses an outsourced model for managing the provision of insurance. Assessment of eligibility services are outsourced to Corporate Scorecard, our Eligibility Risk Manager.
Corporate Scorecard was chosen from a competitive tender process and approved by hbcf to operate in New South Wales.
The Eligibility Risk Manager is expected to underwrite building contractors limiting the hbcf exposure while delivering high quality services to building contractors.
Your role as a hbcf approved broker distributor
A building contractor or builder wishing to obtain insurance eligibility with icare hbcf or dealing with an eligibility review may contact you to help them apply to Corporate Scorecard for an eligibility assessment or respond to a review.
Appropriate advocacy will assist in an informed decision to be made by Corporate Scorecard when conducting the assessment.
Broker distributors are required to communicate with their builder clients clearly and in a timely manner hbcf’s requirements and decisions.
You are required to:
- at all times, act towards icare hbcf with the utmost good faith
- assist in obtaining information that is necessary for the Eligibility Risk Manager to conduct risk assessments
- avoid unnecessary disruption to projects due to commencement and identify such concerns to the Eligibility Risk Manager as required
- provide clients with clear requests for further information and ensure that they have the understanding as to why further information is required
- disclose all matters material to an eligibility assessment in your possession and knowledge.
You should not:
- attempt to influence decisions of the Eligibility Risk Manager by reference to the overall and/or particular business relationships between yourself and the Eligibility Risk Manager
- knowingly advocate to builders to seek a lesser amount of eligibility, which may later require an increase.
Changes to hbcf
In November 2016, reforms to hbcf were announced.
icare hbcf insurance is not financially sustainable and without reform, this will compromise its ability to protect homeowners now and into the future.
Premium prices have not kept pace with the insurance claims experience of the fund and pricing did not cover claims costs and other related expenses.
The introduction of risk-based pricing means building contractors are offered premium prices that reflect their individual level of risk. This will reduce the subsidisation of higher-risk contractors by their lower-risk counterparts.
Risk-based pricing also provides an incentive for building contractors to reduce their risk to obtain lower insurance premiums, thus providing better premium prices to homeowners.
The first change to pricing commenced on 3 April 2017 and the second on 3 October 2017. This included new base rates and the introduction of builder risk based pricing. There will be further premium increases in 2018.
Removal of Broker Distributor Commissions
icare hbcf has ceased paying commissions to broker distributors effective from 3 April 2017.
This change has brought the hbcf in line with icare Workers Insurance which does not pay commissions.
Broker distributors have adopted a fee-for-service model where they now charge builders with competitively-set fees.
Broker distributors’ fees will be separate to the premium paid for hbcf insurance.
Broker distributors decide how much they charge for their services independently and it is a matter between the broker distributor and their builder clients.
Read more about State Insurance Regulatory Authority's summary of hbcf reforms.