The New South Wales Government’s proposed Building (Approvals and Practitioners) Bill 2026 is set to reshape how modern construction methods are regulated and insured in Australia, according to an analysis published by Lockton.
The Bill, introduced to the NSW Parliament, proposes repealing the Design and Building Practitioners Act 2020 (DPA 2020), consolidating a series of amendments that followed the original legislation. A central component of the reforms formally recognises prefabricated and modular construction – collectively referred to as Modern Methods of Construction (MMC) – within the state’s approvals framework, integrating it under both the Home Building Act 1989 and the Environmental Planning and Assessment Act 1979.
Lockton’s analysis noted that Australia’s construction industry is navigating housing shortages, labour constraints, and rising demand, accelerating the uptake of MMC. The broker said the approach offers advantages, including shorter build times, lower rates of on-site human error, and the ability to reuse proven project designs through a transferable product catalogue.
However, Lockton cautioned that the shift towards factory-led construction may concentrate liability in new ways. Under modular delivery models, greater responsibility may fall on off-site manufacturers, integrated design teams, digital design firms, and vertically integrated developers – a departure from the traditionally dispersed liability model across multiple on-site trades.
The analysis highlights particular concerns around professional indemnity (PI) exposures. Unlike traditional construction, where a design flaw tends to affect a single project area, a defect in an MMC manufacturing process can be replicated across multiple modules and entire asset portfolios. Lockton noted that PI policies commonly exclude product risk and that the boundary between professional services and product liability is becoming increasingly blurred as MMC adoption grows.
On the regulatory side, the Bill significantly increases maximum court-imposed penalties for certifiers, from $33,000 to $1.1 million, and introduces stronger conflict-of-interest provisions. Lockton said businesses within MMC supply chains may face greater scrutiny of governance processes, documentation standards, and quality assurance controls.
The broker also noted implications for Management Liability insurers, saying boards pursuing MMC strategies may face heightened scrutiny over supplier dependency, operational resilience, and regulatory compliance.
Lockton concluded that while greater regulatory clarity may ultimately improve insurer confidence in MMC projects, the transition is expected to reshape liability across multiple insurance classes, with the market still assessing the full implications of the proposed Bill.
The Bill arrives against a backdrop of mounting pressure on Australia’s housing sector. AMP chief economist Shane Oliver has estimated Australia’s accumulated housing shortage at roughly 200,000 to 300,000 dwellings, while the National Housing Accord aims to deliver 1.2 million new homes between July 2024 and June 2029.
