Small builders will be urged to take out insurance-backed warranties to protect customers, under new proposals due from the Department of the Environment, Transport and the Regions (DETR).
To help drive unscrupulous firms from the market, the DETR aims to establish a register of "quality-marked" firms offering work-guaranteeing warranties.
The DETR's move is likely to lead to an expansion of warranty schemes run by trade associations representing the UK's 150,000 to 200,000 domestic building contractors, such as the Federation of Master Builders and the Institute of Plumbing.
In the FMB scheme, underwritten by Allianz-Cornhill, only 3,000 out of 15,000 member firms currently use the warranty service.The Federation now expects up to 6,000 more builders to join.
Builders using the FMB service pay a premium of 1.5% of the contract value. The firm is responsible for defects emerging up to five years after completion, but in years six to ten the insurer takes responsibility for damage due to faulty workmanship or poor materials.
The ABI believes the proposals will offer an opportunity for other insurers to get a slice of the market. But Chris Mounsey, the association's property and household manager, said insurers would be cautious until the risks were clear.