By
Michael Bird
November 19, 2024
•
4
min read
In Market Insights EP71, Corey Nugent, CEO of Resilience Insurance, sits down with Mike Bird from Urban.com.au to discuss the critical role Latent Defects Insurance (LDI) is playing in transforming the Australian property market. This episode highlights how LDI is bolstering consumer confidence and providing a much-needed safety net for both developers and homebuyers.
Latent Defects Insurance (LDI) is a relatively new insurance product in Australia but has been an industry standard internationally for over 70 years. LDI provides a 10-year guarantee for structural defects that may arise after construction, covering everything from waterproofing failures to foundation issues. This product ensures that consumers have long-term protection, offering peace of mind in an industry plagued by trust concerns.
Corey Nugent explains how LDI takes the responsibility for latent defects out of the hands of developers and builders, placing it on the insurer, ensuring that consumers are financially protected. This shift helps alleviate fears of costly repairs or legal disputes after a property is completed.
One of the key challenges in the Australian property market is consumer confidence, especially for off-the-plan purchases. Buyers are often hesitant to invest in properties without assurance of quality and durability. LDI directly addresses this issue by offering a structural defects warranty that lasts for 10 years, creating a significant value proposition for both developers and potential buyers.
In the interview, Corey discusses how developers can use LDI as a selling point to differentiate their projects. By including LDI coverage, developers can signal to buyers that the property is built to the highest standards, with the added security of insurance-backed protection against defects that may arise later.
Many people mistakenly believe that strata insurance will cover defects in newly constructed buildings. However, as Corey points out, strata insurance does not cover defects arising from construction issues. Instead, it protects against damage caused by external factors after the property is built. LDI, however, specifically covers defects caused by faulty construction, such as issues with foundations, waterproofing, and structural integrity.
For developers, this distinction is crucial. LDI ensures that consumers are protected against hidden issues that could otherwise result in significant financial losses or even the collapse of the building.
Since its introduction to Australia, Resilience Insurance has seen rapid adoption of the LDI product. According to Corey, the company has seen a dramatic increase in demand, with over 8,000 units expected to be covered by LDI policies in the next 12 months alone. This growing uptake indicates that developers are increasingly recognizing the value of LDI as a tool to boost consumer confidence and protect their projects from future liabilities.
In fact, surveys of consumers show that 65% would be willing to pay more for a property with LDI coverage, reflecting a strong market demand for insurance-backed protection against construction defects.
While the initial cost of implementing LDI may seem like an added expense, it is, in fact, a valuable selling point. Developers who include LDI in their projects are able to charge a premium for the added protection it provides, with many consumers willing to pay 1.5% more for properties that come with this assurance.
Corey also explains how LDI can be cost-neutral for developers, as the price of the insurance is factored into the overall development cost, not as an additional burden. Furthermore, Resilience Insurance supports developers with a technical inspection program, ensuring that properties meet the highest construction standards, further mitigating the risk of defects and ensuring the quality of the final product.
In the interview, both Corey and Mike emphasize that LDI is a win-win solution for developers and consumers. For developers, it offers a competitive edge in a crowded market, while consumers can rest easy knowing that their investment is protected against hidden defects for a full decade. As the property market becomes increasingly focused on quality assurance, LDI is poised to become a critical tool for ensuring long-term consumer trust and satisfaction.
A private lunch for 80 of VIC apartment industry leaders featuring panel discussions with Ilan Samuel of Samuel Property, Brad Walters of Equifax, Corey Nugent of Resilience Insurance, John Meagher of Three Sixty° Property Group, George Glover of Social Garden, Jeroen Weimar from the Department of Premier and Cabinet (Vic), and Michael McCormack of Milieu Property. Topics include iCIRT ratings, consumer confidence, data analytics in sales, and government roles in supply. Explore insights from top experts driving innovation and policy in the real estate sector.
More panel highlights and photography:
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