What did Kimberley Jonsson [of CHU] say about Strata Insurance in Sydney
The May 2024 seminar Exploring Tomorrow’s Strata: Insurance Affordability in Sydney included some of the key players discussing strata insurance issues affecting strata citizens from the 2024 Strata Insurance Crisis.
So, what did they say and how does it matter?
Here’s my key takeaways from the presentation Strata Insurance Market Update by Kimberley Jonsson, the CEO of CHU and a copy of the slide deck.
Kimberley Jonsson [CHU] : Strata Insurance Market Update
In 2024 there’s $1.3 Trillion worth of insured Australian strata buildings : That’s a lot of insurance.
In 2024 there’ll be $2.4 Billion paid for insurance by Australian strata buildings is : That’s a lot of money being paid every year and includes a lot of commission and broking fees.
Strata insurance represents 3.41% of the total Australian insurance market [which is $70.29 Billion per year] : So, strata title insurance is a small part of the market in terms of gross premiums.
The average strata building insurance premium in major cities is $954 per lot per year : But, that excludes the higher risk and higher premium strata buildings in remote areas and northern Australia. So, for many strata owners it will be more.
Madian strata insurance costs have increased by 82% over the last 5 years with some buildings paying more than double : That’s a very significant increase in a relatively short space of time, which is why many see it as a crisis.
Insurance costs have increased because of an historical misalignment with of premiums with building costs, the increasing value of strata buildings and lots, the prevalence of building defects and problematic commercial lot uses [like tobacconists] : Even if all these things are true, it seems very unlikely that insurance premiums were that much lower than they should have been on 2016, that strata building defects are any worse now than before, and, that a few tobacconist shop arson events can have that kind of impact. Especially since the incidence of major weather events was lower than expected in 2022 and 2023.
82% of strata insurance is placed via insurance brokers : That’s a very significant proportion of the market that suggests to me that despite being only 3.41% of the market, strata insurance is very important to the insurance brokers.
Her suggestions of ways strata buildings can reduce insurance costs include:
Increasing policy excesses : so smaller claims aren’t covered or made.
Reducing policy coverage : so you have less things to claim for.
Improving building resilience to extreme weather : which is pretty hard to do.
Improving building maintenance standards : need I say anything about this.
So, if you take less insurance cover and have a problem free building you might be able to pay less for that degraded strata insurance that you’ll be using less often.
Interestingly, the theme of her presentation was to justify these incredible recent increases in strata insurance costs and the current premium levels alongside subtle warnings that these premium levels will only stay at these levels id strata buildings are in good condition [no defects and with maintenance/repairs up to date], reduce their coverage, increase the excesses and make themselves more able to withstand climate change impacts and extreme weather.
So, it’s not really great news for most strata citizens from one of the biggest strata insurance underwriters.
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