Strata manager insurance commission, who pays for it?

booloo wrote:

Hi my strata manager claims they get 20% commission when sourcing out insurance. I was wondering if the insurance company pays them the commission or does that get tacked on top of our insurance policy? Our manager claims we don’t pay for it but another member in community claims we pay for it, is that right? We live in nsw

Here is my understanding of it.  The commission is tacked on top of the insurance policy.  Strata managers are no longer permitted to receive a commission from the insurance company.  They get around it like this.  The insurance company receives all the money.  Then:

.  The insurance company pays the commission to the insurance broker.

.  The insurance broker pays the commission to the strata manager.

.  The strata manager pays something back to the insurance broker.

My owners corp received an invoice from an insurance broker as follows:

Base Premium $4000

Fire / SES Levy $600

GST (10% of the above two items)

Stamp Duty $500

Insurers administration fee $220

GST administration fee $0

Broker Fee $1700

GST broker Fee $170

Strata Manager Commission $0

Total:  about $8,000

The commission is roughly 20% of the total cost:  If you google “strata insurance” and call a few companies for a direct quote, you would be quoted something closer to the base premium.

Insurance commissions are one of the biggest and most understood scams in strata.

Let’s start at the beginning. If an OC goes directly to an insurer it will pay $x for a policy.

If the OC goes to a broker, they will pay $x for their policy. The insurance company pays the broker a “ spotters” fee.
Some brokers will then charge an additional brokerage fee. It can be justified if it requires additional work for the broker to find your insurance.

Then in some cases the broker will split this extra commission with the strata manager. Essentially a kickback to the strata manager for choosing thst broker.

In any of the above cases, the OC is paying the commission or broker fees.
My recommendation is get the committee to find a broker who does not charge an extra fee above what the insurance company pays them.

Jimmy-T wrote:

tina wrote:

Strata managers are no longer permitted to receive a commission from the insurance company.

Really? Why then does the law say that any commissions have to be declared? Also, most insurance companies will not discount the premium by the amount of the strata managers’ commission even if you negotiate directly.

You’re right.  I should have read Strata Schemes Management Act 2015 (NSW) Section 60.

In my defence, when we still had a strata manager, the strata manager said that his employer was no longer allowed to receive a commission for insurance.  Either he was wrong or I misunderstood the message.

I agree that if I dealt directly with an insurance company, who is already working through a broker, they would not exclude the broker’s commission.  However, it is different with insurance companies who are not working through a broker.  There is no broker commission.

I found some strata insurance companies.  I called them for quotes.  I saved almost $5,000.  We also got a premium reduction because we excluded “common contents” from the cover.  When the insurer asked if we had “common contents”, I said “yes we have letter boxes in a brick wall”.  The insurer said that’s already covered by the building policy.  Since we don’t own anything else (e.g. chairs, tables, computers, tv, garden tools etc.) we excluded common contents and saved a bit more.

I mention this because we had common contents cover for decades when the strata manager + insurance broker arranged our insurance for us.  It makes me wonder why we would pay a professional to organise our insurance if they don’t even consider our specific needs.

tina wrote:

n my defence, when we still had a strata manager, the strata manager said that his employer was no longer allowed to receive a commission for insurance.  Either he was wrong or I misunderstood the message.

Some large strata management firms choose not to accept the commission as they can absorb the “loss” and it gives them a commercial advantage over smaller firms that may not have that luxury

Yes, absolutely.  The OC is the client and pays the bills, not the strata manager.