Doing Without an Insurance Broker

Have a listen to this. An insurance industry expert explains everything!

By the way, you don’t have to do anything special to hear our podcasts – just click on the link in the post and it should play on yur computer, phone or tablet.

There are some important points from experience–

–A good Broker (preferably a member of National Insurance Brokers Association ) with experience of the Strata insurance market in particular, will do a good job finding the most appropriate 4 quotes at renewal time.

–At law, the Broker is the Agent of the Insured, and so can give independent opinion on the market, assesses your risk exposure, and applies his knowledge of which underwriter may be best for claims.

–The Broker therefore takes the prime responsibility off the Committee for doing a task which most Committee members have no idea about. (Worth its weight in gold).

–Never appoint the Strata Manager to place the Insurance, as mostly they are paid a spotters commission of 20%/30% of the premium for doing very little and NEVER effectively have any responsibility for errors and omissions they may be responsible for ( have a look at their standard contract which says if the Strata Manager causes any financial loss to the Body Corp, it is the Body Corp which is responsible for the loss  i.e. the Committee!)

–If you want to control costs, make sure the values of assets are checked each year by the Treasurer, who should have a deal with the Valuer for him to give the Body Corp a one line opinion of what he suggests as a sum insured for the next insurance year as a percentage e.g. 3.5% and so on for each year between the 5 year full Insurance Valuations. Get a accurate base to start with. He may charge $250 or so but it as well worth it. When I bought my unit and looked at the last 5 years history of insurance sum insured movements, it was an increase every year of 5% or 6% resulting in overinsurance of 26% in total, including Consultants Fees, Debris Removal etc etc, which do not vary in the same proportion as cost of rebuilding. We had in fact paid thousands of dollars to the Underwriter (and the Strata Manager) for a value insured, they would never have paid due to gross overinsurance. Our Valuer knows a large High Rise Strata block which over the years of negligence, is now more than $20m overinsured! Work that one out! Never accept the view of the Manager/Agent or Insurer that your sum insured must go up each year by what they suggest. They know nothing, so always ask the Valuer whose job it is.

–Also remember, many/most available Insurance markets are in a chain–The Insurance company pays an Underwriting Agent to do their administration for them (say 30%)–the Underwriting Agent sometimes uses a so- called wholesale broker to find the business for them (say another 30%) –part of which is paid to the Strata Manager (about 20%) who is uniquely placed to control the business for the long term future. The Strata Manager may go straight to the Underwriting Agent, but the chain is still inefficient as the Owners still have no independent advice.

–If an independent Broker is used, he will go straight to the Underwriting Agent and sometimes even straight to the end Insurer. Cutting the crazy train of hand outs is the real way of finding the solution.

–Also remember, very few Agents have any staff who have passed insurance exams–they are just a “post office”for the Underwriting Agent. The Strata Manager will say they reserve the right to use a Broker–so admitting insurance is just a lucrative income to Management Fees with almost no responsibility or liability.

Good luck with it all