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Topic
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As a relative newcomer to Strata life I have just been exposed to the details of our insurance policy. Our building of around 50 lots is paying a insurance premium consisting of the following components where the insurance premium itself is $1:
Insurance premium (including levies, stamp duties, etc) of $1
Strata manager – $0.16
Insurance Broker – $0.38So the commissions are 54% of the actual insurance premium (incl levies etc) component, and it appears their percentages are calculated on the duties and levies as well as the actual insurance premium (the latter in our case is just 84 cents)
Is this normal?
I understand the strata manager looks after claims etc and these costs are covered by their commission. But the broker ‘service’ appears to include providing 4-5 options for the EC to choose between, and that’s about it. In fact our broker has the following caveat:
In this instance we only provide a “general advice” service. This means that whilst we may generally recommend the products we distribute, we do not consider whether the product is appropriate for your own personal objectives, financial situation and needs in making the recommendation.
You need to consider the appropriateness of any information (in particular any policy documentation and relevant Product Disclosure Statement) or general advice we give you, having regard to your personal situation, before acting on our advice or buying any product.‘
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Replies
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JC – in simple terms, your owners corporation (O/C) is allowing itself to be double-dipped!
The commission paid to strata managers by ALL insurers is a contentious issue at least from the perspective of its rationale, but I’ve been told that its supposed to reimburse the administrative time and advocacy that strata managers put into quoting and obtaining an insurance contract for a scheme, and additionally for the advantage to the insurer that arises from the strata manager’s close relationship with the O/C and of the risks associated with its scheme.
Whether or not all that’s plausible, if your O/C is additionally paying a broker then it is as I say being double-dipped; so dump the broker and either ask your strata manager for quotes from each of the insurers with whom they have a relationship or have the secretary of the executive committee do a ring-around, and have those proposals however sourced decided upon by a majority vote at a general meeting (e.g. AGM).
The legislators must also have regarded the matter of strata managers’ commissions as contentious, as the NSW Strata Schemes Management Bill (2015) once gazetted (due 11/2016) will require strata managers (S/M) to at each AGM disclose all such commissions that they received during the past year, all that they expect to receive in the coming year, and if the O/C does not consent to those payments for justifiable reasons (as yet undefined) then it can apply to the NSW Civil and Administrative Tribunal (NCAT) for those to be paid to the O/C.
Recent anticipatory amendments that I’ve seen to the standard form of the Strata Management Agency Agreement (between O/Cs and S/Ms) include a quid-pro-quo clause whereby a S/M’s “service fee” may be increased by the amount of any commissions necessarily forgone.
Slightly off-topic but by way of a heads-up for flatchatters, the new Act will repeal the present requirement for an O/C to obtain an insurance valuation each 5 years, so now all O/C’s will need to avoid the consequences of co-insurance by even more closely examining the adequacy of its compulsory building insurance in terms of replacement costs.
jc, I think Whale covered it all.
10 years ago, our strata moved from finding our own insurance and handling our own claims to engaging an insurance broker. The important thing is that we pay no more for our policy. We got quotes from 3 insurance companies to ensure this.
The broker handles and processes all our claims (one 1 in 8 years) so we consider it well worthwhile.
I can’t see the logic of a commission to the Strata Manager as they appear to add no value but the important thing is the amount the strata pays and how much work it has to do.
I won’t say who our insurance broker is, maybe Jimmy has one associated with this site who he has checked out.
CHU Insurance have been loyal supporters of this website from day one. And they are pretty good at what they do. Their new smartphone app (see ad on home page) looks very nifty, making it easier to make a claim without filling in a mountain of forms. What more can I say?
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The simple answer is yes.
If, say, common property was damaged by an owner, you would expect them to pay for repairs. if they wouldn’t or couldn’t, you would expect the insurers to step in. The same applies to tenants, although you could take action against their landlords.
I don’t know where you get the idea that all landlords, including airbnb hosts, have landlord insurance. Or were you being sarcastic?
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