Last week, industry expert John Trowbridge (pictured above) released the findings and recommendations from what he calls the “first step” of his review of current strata insurance practices. The review was commissioned by the Steadfast Group.
The latest release follows the publication in March of a consultation paper outlining the disclosure practices of intermediaries in the strata sector. According to Trowbridge, the paper aimed to overcome the limited understanding of those practices.
“The main message is that the financial operation of the strata insurance market is understood by very few apartment owners; that understanding is needed, and it begins with transparent disclosure,” Trowbridge told Insurance Business.
He also told IB that this review was “sought by those owners engaged in the debate” and both the strata management community and the insurance broking community recognised the need for it.
“Strata owners and their committees who have participated in the consultation process have demonstrated and explained their strong interest in transparent disclosure of strata insurance matters,” he said.
Trowbridge told IB that a “key issue” is how to meet this need for transparent disclosure and said his paper makes a set of relevant recommendations. He recommended that broker quotations and invoices be prepared using standard templates, containing a minimum set of eight items with standard definitions. He also suggested brokers and strata managers (SMs) “ensure timely transmission of quotations and invoices to the strata community during the annual insurance renewal process.”
Trowbridge also recommended that broker presentations and quotations be accompanied by a statement of the scope of services by the strata manager and broker. He said a full explanation of the commercial relationships between the strata manager and the broker should also accompany this information.
Trowbridge also found that, where strata managers and brokers are involved, the strata insurance market’s unorthodox structure is “convoluted because frequently part or all of the commission is paid to the SM and a separate broker fee is charged to remunerate the broker for the broker’s services.”
His report also said the market is “complicated, because frequently not all of the commission is rebated to the SM, the remainder being retained by the broker.”
Trowbridge also referred to “opaque or incomplete disclosure” to the owners’ corporation of insurance-related transactions.
There are two more phases of the review to come.
“Phase two of the review will consider the remuneration of intermediaries and possible reforms, while phase three will discuss competition, affordability and availability of strata insurance,” he said.
Trowbridge said the goals of his three-phrase review include “more affordable insurance cover, more readily available and better understood by strata property owners.”
Some industry stakeholders have commented on the review.
On the website of Bellrock Broking, a firm with offices in Sydney and Brisbane, an article welcomed the Trowbridge strata review. The article expressed hope that it delivers outcomes in the “true spirit of its intent” as an “independent” reviewer of the strata sector.
“Ultimately owners’ corporations and building management committees require compliant, adequate insurance priced competitively,” said the article. “This goal should not be compromised by commercial relationships or conflicted remuneration among key stakeholders.”
The Bellrock article said the firm had experienced many circumstances “where these compromises are apparent. This being particularly concerning among those that have significant market share via their owned insurer/agencies, broking network and strata managers,” said the article.
In September last year, Trowbridge released a landmark independent strategic review, commissioned by the Insurance Council of Australia (ICA), looking at ways of making commercial insurance more affordable and available.
At the time, Trowbridge told Insurance Business “there’s no silver bullet”. However, he outlined some key ideas, including group schemes and consortia, designed to help solve the acute insurance problems faced by small businesses.
The ICA accepted all 13 recommendations in the report and created a Business Advisory Council to look at ways of implementing the Trowbridge recommendations.
The council held an inaugural meeting last October chaired by industry veteran and former NIBA CEO Dallas Booth. The meeting was attended by a range of industry stakeholders including the ICA, the Council of Small Business Organisations Australia, the Australian Chamber of Commerce and Industry, the Australian Small Business and Family Enterprise Ombudsman and the Office of the NSW Small Business Commissioner.
“A review of progress on the recommendations of the independent strategic review will be undertaken in 12 months,” said an ICA release in the lead up to the meeting.
