On the 20 June, 2024 we held an important webinar on strata insurance transparency and commissions in Australia, this time focussing on the remuneration of intermediaries and conflict of interest from third party payment arrangements with John Trowbridge from Trowbridge Consulting. The webinar concentrates on Phase 2 of John Trowbridge’s Independent Review of Strata Insurance Practices, discussing “Black box” arrangements and other questionable practices that can lead to higher premiums and limited choices for strata owners.
Video: Who’s Paying What? Unraveling Strata Insurance Commissions
If you’re a strata owner, understanding potential conflicts of interest in strata insurance in Australia isn’t just about transparency, it’s about ensuring your hard-earned dollars are securing the best possible coverage for your property. Here, we cover the key takeaways from the webinar, including concerns raised about commission structures and steps you can take to ensure transparency. John Trowbridge also looks into proposals for a fairer strata insurance system that puts the consumer’s interests first.
For Strata Property Owners: Demystify Insurance Costs
- Transparency Matters: The current strata insurance system across Australia can be confusing, with commissions and fees hidden behind complex structures. The webinar highlighted the need for clearer disclosure, allowing you to see exactly how much you’re paying for insurance and how much goes to intermediaries.
- Question Everything: Don’t be afraid to ask questions! Request detailed breakdowns of insurance costs from your strata manager and broker. Look out for red flags like lack of transparency or unclear explanations of fees. Request brokers to provide complete disclosure using more detailed templates.
- A Fairer System: The current system with commission rebates to strata managers is conflicted and should be phased out.
For Strata Managers: Stay Informed and Adapt
- Stay Ahead of the Curve: Strata managers have a responsibility to stay up-to-date on industry practices. This session provides insights into the current review of strata insurance and potential changes to commission structures.
- Understand Owner Concerns: By listening to the concerns raised about transparency and commission structures, strata managers can gain a better understanding of how property owners view the current system. This can help anticipate questions and address them proactively.
- Prepare for Change: The webinar discusses potential pathways forward, such as a fee-for-service model. Strata managers can use this information to prepare for potential changes in their role and how they approach insurance for their clients.
John Trowbridge’s thoughts on the SCA Best Practice Guideline
- The templates in SCA’s Best Practice Guideline don’t show GST or the total insurance premium, making it difficult to understand the true cost.
- The Best Practice Guideline templates do not detect or prevent black box remuneration practices.
What the Future Holds
During the session, John Trowbridge states: “every broker and every strata manager that’s using the commission rebate broker fee system is involved in conflicts of interest which are not really healthy in general and that system should be phased out.”
The strata insurance review aims to achieve a more transparent and fairer system for everyone involved. While some strata managers might be concerned about losing commission income, focus should be on ensuring property owners receive the best possible coverage at a fair price.
Underscoring the importance of customer focus, John Trowbridge concludes the webinar by stating that the question of ‘who is the customer?’ should increase transparency and guide every decision in strata insurance in Australia. By promoting transparency and accountability, we can work towards a future where strata insurance serves the best interests of property owners.
Additional Points
- Black box arrangements, where commissions are hidden in joint ventures, are unethical and should be addressed.
- Some strata managers are concerned that losing commission rebates will lead to price increases, but this is unlikely as the total cost should essentially balance itself out.
- New consent for brokers require owner consent for remuneration arrangements. Strata manager need to be aware that delegated authority from the body corporate for consent might not be valid under the new NIBA code.
You can access the presentation from the session plus links to relevant resources here.
Video presenter:
John Trowbridge Trowbridge Consulting
Article author:
The Lookupstrata Team
This post appears in Strata News #700.
Have a question or something to add to the article? Leave a comment below.
Read next:
- ‘Strata Insurance Disclosure Best Practice Guide’ Addresses Industry Commission Practices
- NAT: Race to the Bottom or Sustainable Future? The Strata Management Fee Debate
- NAT: SCA Comments on ethics, conflicts and the future of the strata industry
Visit Strata Insurance OR Strata Topics by State pages.
Looking for strata information concerning your state? For state-specific strata information, try here.
After a free PDF of this article? Log into your existing LookUpStrata Account to download the printable file. Not a member? Simple – join for free on our Registration page.