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by Tom Goodwin
The history of strata insurance in Australia is relatively short, dating only to the late 1970s, when new strata legislation introduced mandatory insurance requirements – first in NSW, then across Australia. During this period, there was a move away from company title units, as they were not a desirable risk from a banking and mortgage perspective. Additionally, the 1960s saw an increase in the number of new and larger apartment blocks aimed at providing more housing. Insurance companies were forced to develop new products to accommodate this largely uncharted territory.
Residential strata insurance was soon followed by commercial strata and community title (i.e. community association) policies as both the strata industry and the corresponding strata insurance industry began to rapidly grow in tandem.
In 2018, strata insurance is distributed both through intermediaries (brokers and strata managers) and directly (mostly smaller self-managed townhouses, duplexes and small unit blocks). According to Bobby Lehane, CEO of CHU, strata is set to become an increasingly dominant force in the Australian insurance industry over the coming years.
“We’re very eager to offer solutions for modern living,” Lehane says. “We’ve always looked further than traditional insurance, aiming to provide customers with broader strata services as the market shifts.”
While traditionally seen as a niche field, the increasing rise of strata living around the country suggests that it’s a key area of opportunity, especially for brokers. Currently, strata living is the fastest-growing form of property ownership in Australia: 4.5m people already live in private attached properties, most of which are strata titled, across the country.
It’s estimated that more than 50% of the NSW population will be living or working in strata within the next 25 years. Other states and territories are likely to see a similar rapid growth in the coming years.
Lehane believes there are three key reasons for the rise of apartments: location, cost and efficiency of space.
“It’s a cliché to say it, but it’s location, location, location,” he says. “As you might expect, apartments are highly concentrated in cities, with 90% of approvals in Sydney, Melbourne and Brisbane.”
However, suburban areas still appeal to many; apartments are increasingly being built in inner and middle suburbs close to transport, amenities and employment centres. Stand-alone houses are often built in greenfield areas, where the surrounding infrastructure may take several years to catch up. Affordability and a lack of space in desirable areas are also key contributors.
“Apartments take up less room,” Lehane says. “That’s a significant consideration in sites where space is an issue, such as inner cities. Land can be used much more efficiently to house a greater number of people.”
Previously, only a handful of specialist strata brokers dominated the space, but the growth of strata living has seen an increase in the number of competitors – underwriting agencies and insurers alike. The complexity of strata insurance and legislation presents an ideal environment for brokers to work alongside their clients, aiding them with the process.
Moving ahead, the shift to brokers providing strata insurance will continue to accelerate. Brokers entering this space need to be seen as trusted experts – not only in policy and claims service, but also in the specifics of legislation governing strata in each state. This will aid in guaranteeing a higher standard of customer service and care, enhancing the reputation of the industry in the long term.
“It is essential that brokers understand the relationship between the owner’s corporation/body corporate and strata managers,” says Lehane. “Additionally, they should have a relationship with the property manager or building manager. And perhaps most importantly, brokers need to understand the unique needs of an owner-occupier, owner-investor and tenants.”
