Robert Kelly, CEO of Steadfast Group, has expressed his strong support for the NSW government’s commitment to reform the strata industry. The National Insurance Brokers Association (NIBA) has also welcomed the move.
The government recently announced its intention to draft new strata laws following consultations with stakeholders. Those consultations are expected to start in the coming weeks.
“I think the government will do something,” said Kelly, CEO of Australasia’s largest insurance broking network. “It will be correctly orchestrated and I’m sure will give a very firm view about the right or wrong of how strata managers are remunerated.”
Days ago, Anoulack Chanthivong (pictured above), the Minister for Better Regulation and Fair Trading, announced the government’s intentions.
Chanthivong said the new laws “are designed to take immediate action.”
One motive for the changes, the Minister said, is to help restore confidence in living and investing in strata schemes.
“I’m sure that his department is very keen to get to the bottom of some of the issues raised by the independent report that we commissioned and, secondly, some of the revelations that have been put out by the 730 Report [ABC News],” said Kelly.
In May last year, industry consultant John Trowbridge completed an independent review of the strata insurance market commissioned by Steadfast Group. Trowbridge concluded that the “opaque” brokers fee system should be phased out in the interests of transparency.
More recently, an ABC News investigation into the strata sector alleged serious abuses by Netstrata, a strata management firm with a brokerage business.
The Steadfast CEO said that bringing greater transparency to the strata industry should be the government’s focus.
“I think transparency is the name of the game and once everything is transparent and everybody understands how it works then the individual can make their decision about the services they receive and how much they cost,” said Kelly.
NIBA, the peak broker representative body, shared a media statement with Insurance Business.
The statement said NIBA welcomed the recent announcement of reforms “which aim to enhance transparency and accountability within the strata sector.”
The statement also mentioned that under the 2022 Insurance Brokers Code of Practice, brokers are already required to disclose commissions on their retail strata products.
“These new reforms will further strengthen transparency by mandating that commissions received by strata managers are also disclosed to the Owners Corporation,” said Klipin. “These changes will ensure that all stakeholders in the strata sector operate with the highest level of integrity and accountability.”
Tyrone Shandiman, chair of Australian Consumers Insurance Lobby (ACIL), has long advocated for strata reforms. For many months, ACIL has raised concerns about a “systemic pattern” of misconduct across the strata industry and the need for greater transparency and accountability.
ACIL recently published the results of its investigation of the strata sector. The report found numerous examples of unethical and sometimes illegal behaviour by stakeholders including insurance brokers.
Shandiman, who is also managing director of Strata Insurance Solutions, and Nikki Jovicic from LookUpStrata, discussed the findings in a recent webinar.
Despite the revelations from stakeholder reports, media outlets, advocacy groups and now the government’s intent to change strata laws, unethical conduct continues.
“A client approached me recently, troubled by a fee amounting to 50% of their premium,” he said.
Shandiman said this broker fee was four times the previous broker’s but the previous broker was changed.
“The broker was changed on advice of the strata manager who received a share of the remuneration,” he said.
Shandiman encouraged other brokers to report malpractice to the Insurance Brokers Code Compliance Committee (IBCCC)
“The only way to improve this industry is by actively reporting unethical behaviour,” he said.
Minister Chanthivong’s release said one area of proposed reform would increase the penalties for strata managers and brokers who fail to meet their obligations to disclose commissions.
Other changes, said the release, would strengthen conflict-of-interest disclosure requirements and ban agents from receiving commissions on insurance products “when they don’t play a role finding the best deal for residents.”
What would you like to see in the government’s new strata industry laws? Please tell us below.
