Victoria’s approach to protecting homeowners through mandatory plumber insurance is facing growing challenges, with recent complaints suggesting that coverage frameworks established more than two decades ago may not adequately reflect current building costs or market conditions.
The Licensed Plumbers General Insurance Order 2002 represents Australia’s sole jurisdiction-specific insurance model for residential plumbing work. Introduced following the sector’s deregulation, the scheme requires licensed practitioners to carry coverage protecting homeowners against defective work. Yet multiple homeowners report experiencing significant obstacles when attempting to recover costs for rectification work.
According to ABC, current policy documents reviewed by industry participants reveal disparities between the ministerial order’s stated requirements and actual coverage terms. Specifically, insurance products frequently incorporate $50,000 caps for defective plumbing defects, while excluding completed work liability protection entirely – provisions that some suggest contradict the legislative framework’s intent.
Homeowners and industry specialists increasingly highlight the gap between anticipated coverage and actual payout practices. One homeowner engaged multiple insurers – Chubb, Berkley, and WFI Insurance – following professional assessments documenting non-compliant drainage work requiring complete replacement at both properties. All three carriers ultimately denied or substantially limited compensation, each policy containing identical $50,000 maximum limits regardless of documented repair costs.
The situation extends beyond individual cases. Parliamentary statements in August referenced a constituent facing $270,000 in necessary corrections, yet the relevant insurer offered a maximum of $50,000. “We know the average cost of building a new home and undertaking plumbing works have significantly increased since 2002. The order also deserves to be reviewed and modernised in line with 2025 building costs and standards,” Victorian MP Anthony Cianflone told ABC.
When approached for comment, the three insurers involved offered limited responses. Berkley told ABC: "We are not in a position to provide any comment regarding this claim as the matter is currently the subject of legal proceedings." ABC said both WFI and Chubb refrained from making public statements, citing ongoing legal matters as the reason for their silence.
Industry practitioners point to insufficient awareness as a contributing factor to claim difficulties. Many homeowners and contractors remain unaware that ministerial order provisions supersede conflicting policy language, according to legal specialists in the field. “Sometimes insurance companies only offer up to $50,000 for compensation, and they just do a blanket rule. There’s a lot more to this than that. There’s legal costs that you can claim, completed works errors in design, and consequential financial losses,” said Dean Charalambous, whose legal practice focuses on plumbing-related disputes.
The absence of precedent adds complexity to claims negotiations. No plumbing insurance claim has reached final judicial determination, preventing the establishment of authoritative guidance regarding entitlements and claim ranges. Charalambous said: “We don’t really have any case authority to tell us who can claim, what is the maximum, or what are the ranges that someone can claim on the plumbing insurance.”
The 23-year-old order contains inherent limitations that experts contend have become increasingly problematic. The legislative language conflates public liability and completed works coverage without clearly delineating separate protections, according to practitioners who have examined the document’s application.
Additionally, the ministerial order fails to incorporate price adjustments reflecting inflation since implementation or account for the subsequent introduction of goods and services taxation. This creates a scenario where benefit levels established in 1997 remain unchanged despite substantial increases in material and labour costs. “The benefits that are potentially available to people today are exactly the same as they were in 1997 when the scheme first came out,” said David Pockett, a retired chartered loss adjuster with two decades of industry experience.
Multiple industry representatives have advocated for reform. Pockett noted previous submissions to senior government bodies: “I suspect the royal commission probably viewed this as some sort of boutique, Victoria-only insurance nobody really worried about.” Despite these efforts spanning several years, no legislative amendments have materialised.
A comprehensive examination of Victoria’s building regulator conducted last November identified substantial deficiencies in consumer protection frameworks. The analysis specifically examined plumbing-related complaints and identified seven representative cases illustrating systemic challenges. Report author Bronwyn Weir, an attorney specialising in regulatory advisory services, emphasised the seriousness of her findings. “I think this is potentially, allegedly, quite serious conduct by insurers, and there needs to be somebody, a regulator, that is responsible for holding them to account,” Weir told ABC.
Weir characterised the seven examined cases as illustrative rather than comprehensive. “There was lots of evidence of this issue. The insurance industry seemed to be, on the one hand, saying that their policies complied with the ministerial order but in practice then seeking to limit their payouts or even limit their acceptance of claims in a way that was inappropriate,” she said.
These findings contributed to the government’s decision to restructure its regulatory body, establishing the Building and Plumbing Commission (BPC) as a replacement entity with expanded enforcement powers.
The newly formed BPC recently completed a targeted inspection initiative examining underground drainage installations. Across 440 inspections conducted over two weeks, inspectors identified 146 instances of non-compliance or incomplete readiness. The enforcement action resulted in 35 monetary penalties exceeding $20,000, 51 compliance notices, and 14 disciplinary referrals. Four individuals operating without proper registration were also identified.
Common deficiencies included inadequate pipe gradients, alignment errors, and missing maintenance access points. “Getting underground drainage right is critical to preventing long-term problems for homeowners. That’s why our inspectors will continue to be out in force. Drainage inspections are mandatory for a reason and plumbers must comply,” said State Building Surveyor Steven Baxas.
Poor drainage installation creates exposure to property flooding, structural compromise, and expensive remedial work. Below-ground systems require inspection and approval before being covered, with provisions allowing backfilling after 30 minutes if inspectors do not attend scheduled appointments.
Victorian government representatives indicated ongoing efforts to address consumer protections through regulatory restructuring. The government stated it would work with relevant parties to modify protections and maintain standards. However, specific actions addressing the plumbing insurance scheme’s legislative gaps remain unannounced, leaving existing coverage limitations unresolved.
