An Imported Solution for Strata Insurance Commissions
As a former prison and colony and as a current member of the British Commonwealth, we’ve imported a lot of things from the United Kingdom into Australia over the last 250 years.
So, why not also import the solution to the challenge of strata insurance commissions?
You see, the UK Government has been addressing the issue for its version of strata title [leasehold and commonhold] for a few years and has formulated its solution that comes into force later in 2025.
In the UK, the managing agents of leasehold and commonhold apartment buildings [their strata managers] have been charging for arranging the building insurances and receiving commissions from the insurers for a long time, with concerns about transparency, disclosure, charge rates, commission levels, and escalating premiums.
Sound familiar?
So, as part of their recent review of the leasehold and commonhold laws, the UK Government commissioned an Impact Statement, issued a Consultation Scope and undertook public consultation on the issues to find a solution.
The solution they’ll be implementing is as follows.
Insurance commissions will be prohibited.
Managing agents can charge apartment building landlords and owners an insurance fee.
The insurance fee that can be charged will be regulated under secondary legislation.
It’s pretty straightforward and, it is said, by the UK Government, to achieve the following things.
End managing agent remuneration being directly linked to insurance premiums.
Stop incentivising managing agents to select brokers/insurers on the basis of commissions.
Improve transparency.
Ensure that charges for insurance related work reflect the fair value of services.
Give owners better information about insurance.
So, is this the right solution for Australia too?
And, if not, why not?
You can find out more about the UK reforms, the Impact Assessment, the consultation, the reform proposals, the reasoning and the new laws here and here.
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