Time Travelling to 2017 on Strata Insurance Commissions

Let me take you a short trip back in strata time.

Back to 2017 when strata insurance was cheap, excesses were low, policy coverage was wide, the grass was tall, and everyone in the strata sector was blissfully happy.  Or, so it seemed.

But, it wasn’t all so rosy in relation to strata title insurance if you bothered to look.

The Federal Senate had referred matters about Australia’s general insurance industry to the Senate Economics References Committee with terms of reference that included strata title insurance in the following terms.

Terms of Reference

The terms of reference for the inquiry are:

(a) the increase in the cost of home, strata and car insurance cover over the past decade in comparison to wage growth over the same period;

(b) competition in Australia's $28 billion home, strata and car insurance industries;

(c) transparency in Australia's home, strata and car insurance industries;

(d) the effect in other jurisdictions of independent home, strata and car insurance comparison services on insurance cover costs;

(e) the costs and benefits associated with the establishment of an independent home, strata and car insurance comparison service in Australia;

(f) legislative and other changes necessary to facilitate an independent home, strata and car insurance comparison service in Australia; and

(g) any related matters.

A few strata sector related groups [but not many] had made submissions to the Committee about strata insurance commissions including the Owners Corporation Network of Australian, CHOICE, and the Consumer Action Law Centre.

Evidence was given to the Committee about strata insurance commissions by a few witnesses including Susan Quinn [Senior Policy Officer at the Consumer Action Law Centre], Margaret Shaw, and Andrew Ziolkowski [Executive General Manager at IAG].

Written answers were given to the Committee’s questions on notice about strata insurance commissions by Allianz and the Insurance Council of Australia.

The Committee specifically covered strata insurance commissions over 5 pages in Chapter 5 of its report concluding [presciently] that:

The committee is concerned that the current disclosure requirements relating to the payment of insurance commissions to strata managers are insufficient and do not provide adequate transparency to body corporate members.

The committee notes that it did not receive any specific evidence to suggest that strata managers are not complying with disclosure legislation.

However, given the significant growth of strata as a form of property ownership in Australia, the committee believes that regulatory change to improve transparency on insurance commissions is justified.

And, the Committee made 2 recommendations about strata insurance commissions as follows.

Recommendation 12

The committee recommends that the government strongly consider introducing legislation to require all insurance intermediaries disclose component pricing, including commissions payable to strata managers, on strata insurance quotations.

Recommendation 13

The committee recommends that state and territory governments strengthen disclosure requirements in relation to the payment of commissions to strata managers.

You can find the Senate Committees report [ironically called] Australia's general insurance industry: Sapping consumers of the will to compare here.

As you all know, despite all that happening in 2017, nothing much changed and we are where we are today.

So, let’s not pretend no one knew anything about strata insurance commissions, fees and charges.  Or, that what’s being said now is new.

April 04, 2024

Francesco …