Strata insurance is undergoing some significant changes, most notably in relation to disclosures over conflicts of interest and commissions.
These have come about in response to two-fold allegations that some strata management firms have been misleading customers. This includes favouring their own brokerage firm and failing to disclose more affordable options, and conflicts of interest between Steadfast-owned brokers and underwriters.
In response to the issues, the Strata Communities Association (SCA) has developed national disclosure guidelines for strata managers to adopt, known as the Strata Insurance Disclosure Best Practice Guide.
Smarter Communities has already implemented all the recommendations of the SCA.
What is in the SCA guidelines?
The SCA’s disclosure guidelines were developed in response to an independent review of strata insurance practices by John Trowbridge.
The Trowbridge report states that the structure of the strata insurance market is confusing where the strata manager and broker are both involved, especially in terms of commissions and disclosures. Its recommendations include fuller disclosures of commercial relationships between brokers and strata managers. The SCA says there is a clear need to improve strata committees’ understanding of the components of strata insurance policies. To this end, the Guide provides a framework for strata managers to follow that addresses three main areas – disclosure of eight financial items, clear documentation, and transparent communications.
The eight financial terms to be disclosed comprise the base premium, emergency services levy, stamp duty, underwriting agency fee, broker fee, GST, commissions and allocations of remuneration. The SCA says it’s crucial that strata managers align with a broker that is willing to disclose these items in clear and understandable terms.
The SCA’s Code of Conduct (listed in the Guide) states that its members must disclose any rebates, discounts or commissions received, as well as any potential conflicts of interest. Members must also not accept any undisclosed commissions from making insurance recommendations.
According to the SCA, it’s hoped the guidelines will eliminate some of the poor practices in the industry, and help improve relationships between strata managers, committees and consumers.
Are the SCA guidelines mandatory?
The NSW Government is in the process of developing legislation that will likely impose stringent disclosure requirements on strata managers. But across the rest of Australia, the changes are not yet mandatory – at least for now.
Smarter Communities National Insurance Manager, Jordao Soares, was actively involved in developing the SCA’s new insurance disclosure framework through SCANSIT (the SCA National Strata Insurance Taskforce).
Jordao says there needs to be more transparency regarding the ownership of brokerage and insurance firms, due to the potential for conflicts of interest – such as where the same strata company has ownership in both.
He states that Smarter Communities strongly supports the SCA guidelines, and will be requiring its broker partners to adopt the new disclosures.
How strata insurance works in Smarter Communities
At Smarter Communities, we believe in providing our members with transparency and choice in all matters, including insurance. We can also reassure our members that we do not have ownership in any brokerage, insurance or underwriting firms.
Our approach involves working with independent advisors, and with insurance providers that specialise in strata and have greater understanding of strata community needs. We provide our customers with a list of strata specialist insurance brokers to choose from.
“As well as having fully implemented the SCA’s recommendations and guidelines, we can assure our clients that we always work at arm’s length when it comes to insurance and will always offer our clients their choice of provider. We have a panel of strata specialist brokers who have adopted the new SCA guidelines,” Jordao says.
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