Politicians debate merits of insurer-based new home warranty

Ontario’s home warranty program will have a new mandate to resolve claims soon as possible, but there’s still no plan to have home warranties written by property and casualty insurers, provincial politicians confirmed.

“The government has decided to continue with changes to a single, administrator model rather than moving to an insurance model,” Government and Consumer Services Minister Lisa Thompson said of Tarion Warranty Corporation during debate on Bill 159, currently before the legislature for second reading.

Tarion, a non-profit overseen by the province, is mandated to licence home builders and ensure they honour their warranties. Tarion also provides a backstop in case a builder fails to honour a warranty.

In a government-commissioned report, former judge Douglas Cunningham recommended in 2017 that new home warranty protection be delivered by multiple insurers competing with one another. Opposition MPPs are disappointed this has not been implemented.

“In effect, what [Cunningham] said is that Tarion needs to be dismantled, with a multi-provider competitive model introduced to replace it,” Green Party MPP Mike Schreiner said Wednesday.

“I kind of thought the [government MPPs], given the fact that [the Progressive Conservatives are] a party that generally likes competition and doesn’t like government monopolies, would have actually gone for those kinds of changes. It seems like it fits with the way they think about the world. But unfortunately it didn’t go that way.”

A 2019 report by the province’s auditor general identified a number of risks with the insurance model, Thompson said March 5. The Rebuilding Consumer Confidence Act is omnibus legislation originally tabled this past December; it proposes changes to laws on condominiums, new home construction, new home warranties, and ticket sales, among others.

“The advantages of moving toward the competitive, multi-provider insurance model is … still unclear,” Thompson said, quoting the 2019 Auditor General report.

There are potential advantages and disadvantages to both the multi-provider insurance model and the status quo, Auditor General Bonnie Lysyk said in her 2019 special report on Tarion.

One of Lysyk’s dozens of recommendations was that the government assess whether it should maintain Tarion as the warranty administrator or change to a multi-provider insurance model.

One of the advantages of a private insurer model is that the carrier could promote better home construction by denying coverage to poor builders, Lysyk said in her report. But it’s also possible that private insurers would be less interested in sharing claims information to inform decisions about licensing builders, she added.

If passed into law, Bill 159 would “establish a new mandate for Tarion to promote the resolution of claims as soon as reasonably possible,” said Robert Bailey, parliamentary assistant to the government and consumer services minister and Conservative MPP for Sarnia-Lambton.

Bill 159 would also remove builders and vendors as parties at the Licence Appeal Tribunal and disputes between homeowners and Tarion over warranties and protection claims –  unless regulations specify otherwise, Bailey said March 5 during second reading.

In 2017, Cunningham noted that Tarion provides an insurance-type product, but neither Tarion nor the warranty protection are subject to the oversight that would ordinarily apply to an insurance company delivering a similar insurance product.