As the federal government commits $1.2 billion to build homes, the real bottleneck isn't capital - a critical shortage of skilled construction workers risks flooding the market with inexperienced builders taking on complex projects they can't safely execute. Construction insurers and brokers occupy a critical vantage point to identify and manage the escalating risks: defects, insolvencies and systemic failures threatening the entire initiative. Without the insurance industry's active role in assessing financial health, experience levels,and capability gaps, the government's housing solution could collapse under the weight of its own ambition.
“If there are more projects, you've got to have the skill set to uphold the standards,” said Marc Crossman (pictured), executive general manager of distribution strategy for UAA Group. Construction insurers are at the centre of any solution to Australia’s housing availability and affordability crisis.
Recent data underscores the urgency. Unusually strong home value gains in October coincided with the federal government's expansion of the 5% deposit scheme, signalling that policies aimed at first-home buyers are having some effect. Yet as government measures attempt to loosen the supply bottleneck, construction firms are struggling to find enough workers.
The government has begun some initiatives to address the issue. In July, eligible apprentices in housing construction occupations could start receiving up to $10,000 in financial incentives to encourage more people into housing construction trades. But whether this incentive scheme will generate sufficient skilled workers remains an open question.
Listen next: Construction sector challenges and trends
Crossman and other construction insurance experts are concerned that with more projects flooding the market, inexperienced players are taking on bigger, more complex work without adequate experience to navigate them properly, increasing insurance risks. "With more projects coming on board, there might be a material risk to the experience levels, which does then represent increased potential for defects and other issues," said Crossman.
Project time pressures can compound everything, creating a scenario where volume overwhelms capability.
Construction’s high insolvency rates also continue to plague industry stakeholders. The post-pandemic hangover of dramatic cost escalations for materials and labour have reduced profit margins, particularly for builders locked into fixed-price contracts. Poor financial controls, inadequate cash reserves and a lack of strategic management have been cited as contributing factors in liquidator reports.
In October, construction firm Built Lifestyles collapsed into liquidation owing more than $300,000 to creditors.
Managing these mounting risks requires insurers and brokers working in tandem. Brokers, Crossman notes, occupy a unique vantage point. They understand their clients intimately and can assess which risk factors matter most. They can examine potential insolvency, financial health, experience levels versus turnover, and crucially, whether those gaps demand differentiated or customised insurance offerings.
Yet the work extends beyond the insurance sector. Crossman acknowledged that construction industry bodies themselves must understand and address these weaknesses. “The broader construction industry needs to properly address and understand this too, because it is - as you said - a housing crisis,” he noted.
