Strata management businesses may face financial instability if proposed changes to insurance commission structures proceed, an industry figure has warned.
Bobby Lehane, CEO of the PICA Group, compared current pressures in the sector to the challenges that affected aged care providers in recent years.
“The aged care sector saw sustained profitability decline, which led to an exodus of skilled professionals and investors. This resulted in deteriorating services to clients and eventual government intervention,” he said.
The warning follows ongoing regulatory discussions in New South Wales, where the government is reviewing the framework that governs strata schemes, including the commission payments strata managers receive for arranging insurance policies.
Lehane noted that strata management has been experiencing a similar financial squeeze, and any abrupt changes to insurance-based income could threaten the sector’s sustainability.
“The strata management sector has endured a sustained period of declining profitability and viability, so any significant changes to remuneration from insurance at this time represents an existential threat,” he said.
Lehane emphasised that commercial viability is essential for strata managers to continue delivering services, especially given rising administrative costs and stagnant management fees.
“As with any industry, strata management requires a level of profitability to survive within the Australian landscape. Over recent years, profit margins have plummeted on the back of increasing costs, stagnant management fees, and increasing complexity of both schemes and legislation,” he said.
PICA Group surveyed strata title holders in New South Wales, Queensland, and Victoria, focusing on attitudes toward changes in insurance remuneration.
In NSW, the data indicated that 71% of owners preferred not to see their management fees altered. A breakdown showed that:
Lehane noted the results indicate widespread concern about rising costs for property owners.
“It’s not surprising that the vast majority of owners don’t want to see their cost increasing; that would be the unintended consequence of any rapid change,” he said.
Strata housing continues to play a growing role in Australia’s residential landscape as apartment living becomes more common due to affordability constraints.
Lehane stressed that decisions made recently will affect how well strata can serve this demand in future years.
“We need to ensure that strata living continues to be a sustainable, scalable, and viable housing option for all Australians. That requires the support of a profitable, vibrant, and service-oriented strata management sector and a model that is affordable to those who live, work, and own in strata,” he said.
In Queensland, strata owners in cyclone-exposed regions are being encouraged to take advantage of new support programs aimed at reducing insurance costs and increasing building resilience.
From April 1, amendments to the Cyclone Reinsurance Pool allow eligible properties to access premium discounts if they undertake certified mitigation upgrades. These upgrades may include enhanced roofing, wind-resistant windows, and stronger external doors.
Syna Hickmott, insurance manager at MAI Strata, said the reforms offer a path to cost savings and improved safety.
“Many buildings are facing skyrocketing insurance costs, and this initiative provides a clear financial incentive to strengthen their properties. Stronger buildings mean fewer claims, and fewer claims mean lower premiums,” she said.
