VICTORIANS are being forced to pay big premiums for home building insurance but are getting very little in return, according to figures released by the Baillieu government.

The Age newspaper says the scheme has been exposed as a multimillion-dollar rip-off, with thousands of people forced to pay premiums and barely any getting anything in return.

In the past 12 months, more than 53,000 Victorians paid an estimated $87.8 million for warranty insurance on home building projects.

But just three owners made successful insurance claims against their builders received a total of $108,476 - a minuscule claims-loss ratio of 0.12 per cent.

According to the Builders Collective of Australia, a group that represents small builders, the insurance offers consumers virtually no protection because its criteria for successful claims are so narrow.

Builders Collective president Phil Dwyer said insurance was an unmitigated disaster.

"It's the worst bad faith product that you could ever find," he said.

"While it was originally conceived as an important consumer protection device, it has devolved into an outright scam and an unmitigated failure of public policy."

Originally published as Victorian home building insurance 'a scam'