Last resort building insurer VMIA exacerbated stress of Victorian homeowners, report finds
Many homeowners felt dealing with the Victorian Managed Insurance Authority was worse than losing their home, a report has found. (ABC News: John Gunn)
In short:
A Victorian Ombudsman's report has found the state's last resort building insurer, the Victorian Managed Insurance Authority (VMIA), was supposed to help homeowners dealing with the collapse of their builder.
Instead, some VMIA staff used vile terms to describe homeowners, and ultimately added to their stress.
It follows an increase in complaints about how the authority has processed claims and treated homeowners.
Victoria's state-funded home building insurer exacerbated the stress of homeowners, with staff using vile and derogatory terms to describe people dealing with the collapse of their builder, a damning ombudsman report has found.
The Victorian Managed Insurance Authority (VMIA) provides domestic building insurance (DBI) and is available when a builder goes bust.
In recent years it has been inundated with claims following the collapse of volume builder Porter Davis in March 2023.
As reported by the ABC last year, there's been an increase in complaints from claimants about how the VMIA has processed claims and treated homeowners.
In her report tabled in parliament, Victorian Ombudsman Marlo Baragwanath found that VMIA failed to "effectively communicate its decisions and intentions to homeowners, creating a justifiable perception of unfairness".
Victorian Ombudsman Marlo Baragwanath's report found the authority failed to communicate its decisions and intentions to homeowners. (Supplied: Victoria Ombudsman)
The report also looked at complaints from those dealing with other insolvent builders. Many said dealing with the VMIA was worse than losing their home.
"VMIA staff lacked empathy and failed to try and understand homeowners' experiences. We saw a tendency among VMIA staff to view homeowners as roadblocks in the way of processing the claim," the report found.
"Sometimes VMIA staff would distrust or assume the worst of homeowners.
"This is not what people expect of a government service."
The inquiry unearthed a poor culture, with the probe uncovering messages between staff laughing about the misfortune of claimants.
"I'm on fire today, called a C**t owner at 8.15 this morning, put her in her place,'' one text said.
"Just called an owner and woke them, score stupid effen query [sic],'' another message said.
While another simply said, "I hate them all".
The VMIA said those staff had now been counselled.
For many people the VMIA did fulfil its purpose of completing homes after a builder collapsed.
The report found the government insurer could have been better prepared for the collapse of Porter Davis. (ABC News)
"However, for some, especially those living in a home with ongoing defects, the DBI scheme did not live up to its purpose. As a government body VMIA should have exercised more discretion within the bounds of the DBI policy to achieve fair and timely outcomes,'' the report found.
It was a common complaint unearthed by the ABC last year, amid anger the VMIA were obtaining quotes from preferred builders to complete works, or rectify defects, were much lower than privately sourced quotes.
"The inspection reports relied on by VMIA and subsequent decisions could, at times, appear to contradict the findings of inspections that the homeowners had commissioned. This caused extra stress and concern for some homeowners,'' the report found.
Ms Baragwanath found the VMIA could have been better prepared for the collapse of Porter Davis.
'Compounded the problem endlessly'
Six years ago Siddarth Prakash and Chetna Mahadik's builder fled the country, leaving them with a half-built house riddled with defects.
Chetna Mahadik and Siddarth Prakash feel vindicated by the findings. (ABC News: Kyle Harley)
They had faith the VMIA would help them, but say that turned into a disaster because the authority forced them to engage a builder with a low-cost quote, who created more problems.
Mr Prakash said they were gaslit by the authority and were told their claim would be withheld pending the signing of a non-disclosure agreement.
The couple said fixing further mistakes by the VMIA-appointed builder cost them hundreds of thousands of dollars.
The feel vindicated by the ombudsman's findings.
"They compounded the problem endlessly," Mr Prakash said.
"It was more than a catastrophe — it was a complete disaster. I wish we never knew of them."
Ms Mahadik said the experience undermined her faith in Victoria's institutions and government.
Use of lawyers seen by some as 'too adversarial'
The report also found the state-backed authority used lawyers to help to deal with claims quickly, but this was seen by some people to be too adversarial.
Between 2022 and 2024 the VMIA spent $22.8 million on four external law firms.
"The use of lawyers implies litigation and was intimidating for some homeowners which caused them anxiety and made them suspicious that their claim would not be dealt with fairly,'' the report found.
In some cases, the VMIA's use of lawyers was intimidating for homeowners and caused anxiety, the report found. (ABC News: Danielle Bonica)
"Victorians seeking financial relief from a public body at a time of personal crisis would expect to deal with claims managers, not litigators."
Communication, delays and a lack of information
Ms Baragwanath's report also found a lack of transparency around the use of volume builders to fulfil contacts and was critical of VMIA's communication with claimants which were plagued by delays and inadequate information.
"It also hampered their ability to effectively make financial and personal arrangements while their claim was being resolved. Their home ownership dreams were in jeopardy and their lives were on hold for an indeterminate, and for some, excruciating, amount of time,'' the inquiry found.
The VMIA said it worked hard during the unprecedented collapse of Porter Davis.
"VMIA has always been committed to helping people get back on track after their builder has died, disappeared or gone insolvent. Our management of domestic building insurance claims has worked well for the vast majority,'' chief executive Andrew Davies said.
"For those where it did not, we apologise."
The ombudsman recommended the VMIA improve transparency and communication with claimants and work with government to find a mechanism to avoid disputes landing in the Victorian Civil and Administrative Tribunal.
Opposition spokesperson Evan Mulholland said the report laid bare "the unreasonable distress and hardship suffered by homebuyers as a consequence of Labor's mismanagement".
"No family or homebuyer should've been put through such a bureaucratic nightmare when their house and financial future was on the line," he said.