Thank you Chair and Committee for the opportunity for HIA to appear at the Inquiry today.

I would like to focus on the growing challenges facing small building businesses in accessing insurance, and the broader implications this has for housing supply, competition, business viability and productivity across the construction sector.

Insurance is no longer simply a business cost. For many builders it has become a major barrier to operating, growing and, in some cases, remaining in business.

Over recent years, builders have experienced substantial increases in premiums across public liability, professional indemnity, contract works and residential warranty insurance.

It is not uncommon to hear examples of businesses that were paying $15,000 to $20,000 annually for a package of construction-related insurances now facing renewal costs of $40,000, $60,000 or more. In some cases, builders report premium increases of 100 to 300 per cent over relatively short periods, despite having no claims history and no change in business operations.

The issue is not only the price of insurance. It is also access to insurance.

Many insurers have become increasingly risk averse towards the construction sector. As a result, builders are required to provide extensive and growing levels of documentation during underwriting. A small business owner may be required to provide detailed financial statements, tax returns, work-in-progress reports, cash flow forecasts, project pipelines, subcontractor information, quality assurance processes and detailed histories of past projects, often every year and sometimes multiple times per year.

For a large construction company, this administrative burden can be absorbed by dedicated finance, legal and compliance teams. For a small builder employing five, ten or twenty people, it is often the owner completing this work late at night after managing projects during the day. The regulatory and administrative burden associated with obtaining insurance is becoming a significant cost in itself.

A particular source of frustration is that many builders believe insurers are not adequately recognising long-term risk performance.

We hear examples of family-owned businesses operating successfully for 20, 30 or even 40 years without major claims, significant defects or disciplinary action, yet they continue to face blanket premium increases similar to businesses with a much higher risk profile.

In many sectors of the economy, a long history of safe operation is rewarded through risk-based pricing. Builders are increasingly asking why decades of successful trading, strong compliance records and clean claims histories do not appear to result in materially different insurance outcomes.

The result is a growing perception that builders are being assessed as part of an industry wide risk profile rather than as individual businesses with distinct risk characteristics.

There is also a broader policy issue that deserves attention.

Insurance costs do not exist in isolation. Small building businesses are simultaneously responding to a wide range of regulatory reforms and compliance obligations. These include housing taxation, minimum taxation on trusts, increased licensing requirements, changes to building codes and standards, expanded documentation requirements, strengthened consumer protection measures, workplace relations changes, workplace health and safety obligations, environmental and sustainability requirements, reporting obligations and evolving contractual risk allocations.

Each reform may be justified individually. However, small businesses experience them cumulatively.

The challenge for small builders is not one single regulation. It is the combined impact of dozens of regulatory changes, additional compliance tasks and rising business costs occurring at the same time.

When rising insurance premiums are combined with increased compliance costs, labour shortages, material cost volatility and tighter financing conditions, the overall effect can be significant. The businesses most affected are often the smaller and medium-sized firms that form the backbone of local building industries and housing delivery.

The consequence is that some builders choose not to expand, some decline work that carries higher insurance requirements, and some leave the industry altogether. Ultimately, this reduces competition, constrains housing supply and places further upward pressure on construction costs.

From the perspective of small business, the key policy objective should be to ensure that insurance markets remain accessible, affordable and appropriately risk based. Builders need greater transparency around underwriting decisions, better recognition of demonstrated long-term performance, and a regulatory environment that considers the cumulative impact of reforms on small business operators.

Accordingly, HIA’s recommendations to this Inquiry reflect the reality that the legitimate market dynamics are being materially amplified by Australian policy settings that can and should be corrected. 

This is not by another round of more Parliamentary Inquiries but by meaningful and lasting reform and with small businesses designed front and centre not as an afterthought.

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