Strata managers accused of $240m insurance rort

Almost 150 allegations of improper insurance commissions paid to strata managers, worth more than $240 million, have been reported to both the Australian Securities and Investments Commission (ASIC) and the Australian Competition & Consumer Commission (ACCC).

The Australian Consumer Insurance Lobby (ACIL) says 146 examples of what it believes constitutes misconduct, involving the unlawful appointment of insurance brokers by strata managers, have been identified and reported.

“Our investigations suggest a disturbing trend where strata managers have been implicated in financially benefiting from the switching of insurance policies to brokers who then levy exorbitant fees and commissions,” ACIL chair Tyrone Sandiman said in a press release this week.

“This occurs without the informed consent of the insured parties, leading to substantial financial detriment. ACIL’s findings indicate that these practices have contributed to consumer financial losses in excess of $240 million.”

ACIL says the “gravity of the situation” has prompted it to urge ASIC and ACCC to not only scrutinise the 146 reported examples but to also embark on a broader, industry-wide investigation.

This, it says, “will uncover widespread instances of unlawful activities perpetrated by strata managers in the arrangement of insurance, underscoring the need for immediate and decisive regulatory action.”

ACIL has produced a video detailing its findings and the steps it has taken in representing these issues to ASIC and ACCC. Further information about ACIL can be found on its website.

The SCA has responded, predictably, with an attack on ACIL Chair Tyrone Shandiman which, notably, fails to refute or address his claims – just attacks the fact that he made them.

This is what the SCA said:

The complexity of strata insurance, including the appointment of brokers and delegated authority makes it difficult to judge each case without knowledge of the full set of circumstances, however we find the public, unsubstantiated comments regarding monetary values and associated actions intentionally alarmist and unhelpful to achieving better outcomes for consumers.

This is particularly in light of ongoing engagement with Tyrone Shandiman in his capacity as representative of ACIL and good faith discussions around the significant changes in supporting more transparent insurance and informed strata consumers.

SCA is committed to improving strata insurance consumer outcomes, having just launched the new best practice disclosure guide for strata insurance, which builds on the existing provisions and will further improve transparency, communication, remuneration disclosure and consumer knowledge in this space.

SCA has committed significant resources over the last four years to better outcomes in the space, including adoption of the John Trowbridge report recommendation on transparency, commissioning the research report A data-driven holistic understand of strata insurance by Nicole Johnston in 2021, representing the strata sector in the formation of the Cyclone Reinsurance Pool, forming a dedicated national strata insurance taskforce and aiding the ACCC in their inquiries into strata insurance in North Queensland.

SCA continues to work with all of the major strata underwriters, brokers, software providers, strata management firms, consumer groups and industry bodies to make positive changes to the strata industry to improve outcomes for consumers.

I’m sure I’m not alone in thinking it might have been more productive for SCA to listen to the allegations and deal with them than embark on yet another knee-jerk defensive-aggressive complaint.

As for “transparency” that merely seems to involve “informing” owners that they are taking 20 per cent commissions on insurances that strata schemes can’t avoid, rather than hiding it. Not sure if that is a major step forward.