Call to ban strata insurance commissions

Strata managers are incapable of effectively self-regulating insurance commissions in strata schemes and the payments should be completely banned, says a consumer lobby group. 

The Australian Consumers Insurance Lobby Inc (ACIL) says failed consultations with the key strata management body Strata Community Association (SCA) has led them to conclude the industry is incapable of self-regulation.  Strata insurance is mandatory and strata managers routinely get 20 per cent of the premium paid back to them by the insurance companies while strata schemes save nothing by negotiating their own policies.

In an attempt to correct what many in strata see as a rort, ACIL is calling for an industry-wide ban on commissions and financial benefits to strata managers in the provision of strata insurance.

Acil says this move aligns with the recommendations by the Australian Competition and Consumer Commission (ACCC) and is further supported by findings from the ‘John Trowbridge Independent Review of Strata Insurance Practices’ commissioned by Steadfast, which exposed significant concerns regarding strata manager remuneration.

Historically, ACIL says it had resisted calling for a complete ban, opting instead to explore the option of self-regulation within the industry. However, recent discussions with Strata Community Australia, spanning three meetings from July to November, had not yielded ACIL’s desired outcomes in addressing key consumer concerns.

ACIL’s advocacy efforts were aimed at enhancing transparency, choice, integrity, and accountability within the strata management sector. Although there was mutual recognition of the need to address “bad actors”, ACIL says collaborative attempts with SCA have been insufficient.

A significant point of contention has been SCA’s consumer guide. While ACIL advocated for a comprehensive guide detailing industry best practices for consumer empowerment, the final document created by SCA, fell short of addressing ACIL’s critical consumer issues, despite including some of its inputs.

Key areas of ACIL concern that it says were omitted include:

• Committee Oversight on Appointments: Advocating for transparency in notifying committees on new broker appointments by strata managers.
• Transparency in Remuneration Changes: Highlighting the need for clear communication about remuneration changes during the appointment process.
• Timely Information Facilitation: Addressing unreasonable delays by strata managers in providing essential information for insurance tendering.
• Clear and Accurate Role Information: Ensuring strata managers provide truthful and clear information about their role in the insurance process and to present alternative proposals honestly.
• Consumer Guide Omissions: Concern over the lack of advocacy for the distribution of the consumer guide at crucial times.

ACIL had further outstanding concerns with contract conditions in SCA Standard Agreements and how best practices will be adopted across the industry, among others.

Despite SCA’s efforts, ACIL stresses the need for more robust oversight mechanisms and higher standards to ensure consumer protection. This has led ACIL to actively campaign for a ban on commissions to strata managers, involving media and political advocacy, and referring specific issues to regulatory bodies.

To explain their stance on banning strata manager commissions, Acil has produced produced a YouTube video that it says, provides a comprehensive analysis of this topic.

From the ACIL website: ACIL is a leading consumer advocacy group dedicated to protecting the rights and interests of insurance consumers across Australia. ACIL actively engages with industry stakeholders, policymakers, and government representatives to address market failures, promote fairness, and improve insurance practices for the benefit of all Australians.  

Further information about ACIL can be found on their website https://www.acilobby.org.au/