“It was about transparency,” said Robert Kelly, CEO of Steadfast Group, the largest broker network in Australia and New Zealand. Kelly said stakeholders should “make sure that everybody knows who feeds from the revenue trough.”
He was referring to a strata insurance market report by industry consultant John Trowbridge (pictured above). Steadfast commissioned this independent review and Trowbridge’s final report was released in May.
“Energising the strata insurance market: a blueprint for affordability, availability and competition” was intended, said Trowbridge, to facilitate a review of the industry in three phases. Broker commissions and charges were one focus of the review: Trowbridge said the commission rebate/broker fee system should be phased out.
“Not one person has rung me to discuss it,” said Kelly when Insurance Business asked him what review feedback he has received.
IB said that must be disappointing.
“I’m not disappointed because I publicised something that I thought needed to be publicised,” said the Steadfast CEO. “I could have done John’s [John Trowbridge] review but I had to get somebody independent that people and experts would take notice of - I can’t do any more than do that.”
Kelly said if industry stakeholders have issues with the way the strata market operates, at least Steadfast can say it backed an independent review of the situation.
“We published a report for everybody and the report has died,” said Kelly.
IB asked Kelly what a next step might be?
“There’s not a lot more I can do other than get an independent person to do an independent review,” he said. Kelly reiterated that Steadfast, apart from funding it, had nothing to do with the review itself.
“In fact, many times he [John Trowbridge] asked me my opinion, and I said, ‘No, John, I’m not going to give it to you because I don’t want anybody to ever say: did Kelly say that to you? Because I didn’t.’”
He said the three-phrase report – that went into full swing in March last year with the release of a consultation paper – was commissioned at “great expense.” Kelly said Treasury, ASIC, the ACCC, NIBA, the Strata Community Association (SCA) and other industry stakeholders all have a copy.
“I’m hoping people will look at the review and make a decision about maybe changing some of the ways we’re going about doing our business,” he said. “And really, the participants in this market should reflect upon its comments and the legislation and review whether they’re happy with the way they are interacting with the strata that they represent and the insurer and the advisor.”
Kelly said he plans to meet with Trowbridge in the coming days to discuss any updates.
“On intermediary charges, owners’ corporations are encouraged to satisfy themselves as to the appropriateness of fees and commissions,” said Trowbridge when his final report was released.
He also said his Phase 3 paper identifies two priorities: “The first is an implementation of the Phase 1 disclosure regime,” he said. Trowbridge said the Strata Community Association (SCA) is “actively pursuing” these recommendations with the broking community.
The second priority, said Trowbridge, is insurance market capacity, which he described as “constrained.”
“The insurance industry, comprising insurers and underwriting agencies, is being urged to investigate, in collaboration with representatives of broking houses, strata management groups and owners’ corporations, what steps can be taken to alleviate the market capacity problem,” he said.
Trowbridge said an availability issue he also considered is replacement cover value. He said underwriters do not offer it despite legislation requiring it. “There has to be a better way,” he said.
An article on the website of insurance brokerage, Honan, discussed strata challenges.
The article said reduced insurance capacity, trades and material shortages, inflation and longer open claim lifespans are among the issues. However, “a new challenge is growing,” it said.
“We are seeing far more buildings with defects and maintenance issues and insurers and underwriters are struggling to provide solutions for the volume of requests,” said the article.
The Honan report also discussed how insurers are responding.
“While owners’ corporations take up the help and advice offered to them by state governments, it is common to see insurers refuse to quote insurance renewals until defects and legal proceedings are fully resolved,” said the article.
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