Review of Strata Insurance reveals shortcomings in industry practices
A critique of current practices in Strata Insurance is underway following the release of an independent consultation paper commissioned by Steadfast Group. The consultation paper is the work of former regulator and insurance industry expert John Trowbridge and constitutes the first of three intended phases of the review. The paper outlines the disclosure practices of intermediaries and aims to boost awareness and understanding of current practices among insureds and industry stakeholders.
John Trowbridge said ‘’The market structure for strata insurance is different from that of all other insurances because of the multi-owner nature of strata properties and the participation of strata managers in the chain from insurer to client. This paper is aimed at generating an understanding of current practices, a critique of those processes and proposals for improved future practices.”
The paper has highlighted issues within Strata Insurance, particularly regarding transparency of remuneration:
“The ‘broker fee’ arrangement is poorly understood generally by ECs and OCs. That is one of the stimuli for this project”.
Notably the paper poses questions addressed to industry professionals on subjects ranging from the nature of relationships between strata managers and brokers to the regulatory obligations of these parties and suggestions for how to modify and improve disclosure practices.
As part of the review, brokers, strata managers, underwriting agencies and insurers have been invited to provide their views on current practices. Submissions are due by 20 April 2022. The second phase of the review will include findings of the submissions, suggest reforms to remuneration and other intermediary practices. The third phase of the review will cover competition, availability and affordability of Strata Insurance.
Bellrock welcomes the review and hopes it indeed delivers outcomes in the true spirit of its intent, the emphasis being on “independent”. Ultimately owners’ corporations and building management committees require compliant, adequate insurance priced competitively. This goal should not be compromised by commercial relationships or conflicted remuneration amongst key stakeholders. We have experienced many circumstances where these compromises are apparent. This being particularly concerning among those that have significant market share via their owned insurer/agencies, broking network and strata managers.
Solutions offered by Bellrock on current issues such as programme design, compliance and market capacity (some of these traversed here) are having a significant impact on traditional methodology in transacting strata insurance. This is frustrating commercial relationships and consequently the top line of many stakeholders.
Bellrock, led by our Strata Specialist, Stephane Pouzet will be traversing these issues in greater detail in our response to the review. We welcome reforms that ensure transparency of remuneration and articulate the importance of the principal duties and obligations of advisors to owners’ corporations.
We will continue to keep you apprised of developments.
For further information or assistance with strata related matters, please contact us via the form below.