The Price of Protection – SA’s Builder Insurance Reforms Are a Necessary Cost, but Not a Perfect Fix
South Australians planning to build their dream homes are about to pay more for peace of mind. From October 1, sweeping reforms to the state's building indemnity insurance scheme will see premiums rise by 25 per cent — a necessary correction in a market still reeling from builder insolvencies and pandemic-fuelled construction inflation. Yet while the intent is commendable, the implementation raises fair questions about equity and the broader implications for housing affordability.
Let’s be clear: the increase in maximum payouts from $150,000 to $250,000 is overdue. Anyone who has faced the heartbreak of a half-finished home after their builder disappears, dies, or goes bankrupt knows that $150,000 barely scratches the surface in today’s construction market. A recent government review — the first since 2013 — rightly acknowledged this, prompted by a wave of builder collapses, such as the $30 million implosion of Felmeri Group and the 251-claim fallout from Qattro Built’s demise last year.
But this reform, while well-meaning, lands hardest on the very people the housing market is failing most: first home buyers and young families. With average premiums for builds between $500,000 and $750,000 jumping from $2251 to $2814, this isn’t just another line item — it’s another brick in the wall of unaffordability.
The burden will be borne, as always, by consumers. While builders are technically responsible for purchasing the indemnity insurance, the cost is inevitably passed on. Housing Industry Association SA’s Stephen Knight notes that every additional cost delays or derails the homeownership aspirations of thousands. And with the National Housing Accord setting ambitious targets to resolve our housing shortfall, a policy that inflates upfront costs risks becoming counterproductive.
There are also deeper structural issues that remain unaddressed. While the new maximum payout is now higher than in Queensland and Tasmania, it still trails Victoria ($300,000) and NSW ($340,000). And as the Master Builders Association rightly points out, a missed opportunity lies in failing to tie maximum payouts more closely to the contract value of each build. Doing so could have created a fairer, risk-weighted system — providing stronger protection for large-scale projects while easing the cost burden for lower-risk builds and renovations.
The truth is that South Australia’s construction sector is still carrying the bruises from a volatile few years. Government stimulus packages during COVID, combined with global material shortages and labour constraints, created a perfect storm that pushed many firms to the brink. Commercial insurers abandoned the space over a decade ago, prompting the Weatherill government in 2013 to step in and underwrite the scheme — a move that, while necessary, illustrates the fragility of this crucial safety net.
In 2024–25 alone, the state provided a record $18.7 million to homeowners left stranded — a figure that underscores the sheer scale of the problem. The reforms are, in many ways, a response to this unsustainable outlay, designed to ensure the indemnity scheme can cope with future shocks without leaning so heavily on taxpayer bailouts.
But even the best insurance is a poor substitute for good regulation and financial oversight. If we want to protect consumers from builder insolvency, we must also strengthen licensing requirements, tighten oversight of company finances, and mandate greater transparency across the supply chain. Insurance should be the safety net — not the first line of defence.
This reform is a step in the right direction. It reflects the realities of today’s construction market and ensures homeowners have greater recourse when things go wrong. But it’s also a reminder that there is no such thing as free protection. In a state grappling with a housing affordability crisis, we must tread carefully. Price hikes, however justified, risk pushing the dream of homeownership even further out of reach.
