ICA proposes solutions to tackle strata insurance costs and risks

The Insurance Council of Australia (ICA) has issued a policy paper with 17 proposals designed to enhance the strata insurance sector, focusing on reducing costs and addressing risks for strata property owners.

The document, “Improving Consumer Outcomes for Strata Communities,” examined market challenges such as rising premiums, supply chain issues, and the increasing frequency of extreme weather events.

The ICA’s recommendations emphasise collaboration between government bodies, insurers, brokers, and other stakeholders to implement reforms across the strata insurance landscape. These proposals seek to address affordability, improve consumer awareness, and encourage stronger risk management practices.

Recommendations for industry and government action

Among the 17 recommendations, the ICA has suggested:

• expanding education for strata managers and members of owners’ corporations to enhance their understanding of roles and responsibilities;
• enforcing fee transparency and better disclosure of relationships between strata managers and service providers;
• promoting strategic land-use planning to ensure properties are developed in low-risk areas;
• embedding resilience into the National Construction Code to address current and future climate challenges;
• strengthening compliance in design and construction practices across Australian states and territories; and
• establishing maintenance regimes managed by owners’ corporations and facilitated by strata managers.

The ICA stressed that proactive measures to de-risk the sector are crucial for managing rising claims costs and stabilising insurance prices over the long term.

Strata insurance regulation updates

The report also acknowledged legislative changes already set to take effect, including:

• a requirement, starting in July 2025, for retail clients to provide consent before commissions can be collected under the Corporations Act 2001; and
• new disclosure rules in New South Wales, effective February 2025, mandating strata managers to increase transparency about commissions associated with insurance placements.

Insurance industry welcomes strata reforms

The ICA welcomed the reforms, describing them as steps toward greater transparency and accountability.

CEO Andrew Hall explained that strata insurance is a significant sector that requires coordinated management to ensure positive outcomes for consumers.

“As one of the largest mandatory insurance sectors in the country, it’s important that strata is managed properly for consumers,” he said. “The Insurance Council acknowledges recent public interest in the disclosure practices and potential conflicts of interest associated with payments received by brokers and/or strata managers through the placement of insurance.”

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Hall said the industry would work closely with stakeholders to monitor the effectiveness of these measures before considering further regulatory changes.

“The recommendations outlined in this policy paper have been developed in consultation with our members, and the industry looks forward to collaborating with our stakeholders to ensure a future with a resilient, efficient, and strong strata sector,” he said.