As Australia’s strata housing market gears up for huge growth in the next two decades, a price war has broken out among insurers fighting for a piece of the action, with strata cover premiums falling 20-30%.

Increased interest from players such as Allianz means competition to win or retain clients and develop innovative business models to secure long-term market share has intensified.

“From our perspective, discounting is very aggressive, particularly on larger properties with good claims histories,” Ryan Houston, the National Manager of CGU-owned Strata Unit Underwriters (SUU) told insuranceNEWS.com.au.

“We’re seeing discounts of 20-30% on our technical rate.

“We’re discounting where we need to across all states, because we’re looking to hold onto well-performing business that’s under attack from several of our competitors.”

Tyrone Shandiman of Queensland-based broker Strata Insurance Solutions (SIS) agrees.

Both Longitude [underwritten by Vero] and QUS [underwritten by AIG] are conducting an aggressive approach to business, he says. “Even on renewals where QUS and Longitude were competitive last year, they are still reducing their rates.”

Mr Shandiman has seen rate cuts of 33-37% on accounts moving insurers and up to 10% for renewals last month.

After analysing 30-40 SIS renewals, pricing for only three increased – and one of those was due to claims.

“We’re shaking our heads,” he told insuranceNEWS.com.au. “Rates were competitive last year when we quoted.”

The situation is “great for owners”, but the lower rates may be unsustainable, he says.

With rising capital in the insurance market, conditions have softened as new and established players step up the fight for dominance.

The leading brokers in strata are Honan Insurance Group, Whitbread Insurance Brokers and Body Corp Brokers.

The top insurers are CGU, CHU and SUU, while Mobius Underwriting Australasia and Steadfast-backed QUS are also making an impact.

Mobius has entered the residential and commercial strata markets, targeting properties valued at more than $10 million.

Suncorp has re-entered Queensland with a national direct strata product for properties of up to 10 units that it says helps address north Queensland affordability. Owners can buy the policy direct through a call centre and save 20%.

Underwriter Brooklyn last year launched a strata product for northern Australia, with a capacity of up to $15 million.

QUS aims to be one of the top three strata underwriters in Australia, after changing security from WR Berkley to AIG last year and raising its sum-insured risk size to up to $100 million.

Allianz, which previously offered strata insurance direct, has partnered with new underwriting agency Strata Community Insurance (SCI) to lift its market share from 2%.

SCI MD Paul Keating has seen cuts of 15-20% in premium rates since the agency was launched in November, but he says it is here to stay and has agreed to partner with Allianz for 10 years.

SCI’s proposition is broader than price, because it also offers education. This year it has trained 500 strata managers in all states about insurance and the law, and it plans to hold another set of sessions in spring because “there’s a lot of demand and it’s part of what we want to develop”.

Its entry to the market has hit a hurdle, with Steadfast refusing to cross-endorse its authorised representatives, resulting in a complaint by SCI to the Australian Competition and Consumer Commission.

Cross-endorsement would mean the companies share indemnity, which Steadfast MD Robert Kelly says he will not do for a new business with no track record.

Mr Keating says the issue has yet to be resolved and it is inappropriate to comment.

“We are still willing to talk to Steadfast,” he said.

Whitbread’s Melbourne-based CEO Stephen Jones has seen premium cuts of 5-10% for renewals and up to 25% for new business.

Whitbread, Victoria’s leading strata insurer, has operated in Sydney for 10 years and opened a new office in the growing Brisbane market last October, he told insuranceNEWS.com.au.

Nationally, the residential strata market expands by 4-6% a year.

“Every insurer is trying to find their sweet spot in the market,” Mr Jones said.

Strata housing is growing fast, with one in 10 Australians now living in such homes. In Sydney it is closer to one in four.

Mr Jones says industry reports show 41% of people will live in strata complexes by 2040, and nearly half of Sydney’s housing stock will be multi-unit dwellings.

In the past 20 years strata insurance has moved from a product to a distribution focus, led by players such as Steadfast.

“There’s far more choice now,” Mr Jones said. “Whether it’s brokers or insurers or direct players, they are less patient and are taking it upon themselves to drive their business strategy.”

Another major player seeking to differentiate itself is SUU. It aims to retain customers by cutting premiums to more than 7000 unit-owners this year as part of its north Queensland resilience project, under which it tested 390 dwellings for disaster resilience.

Mr Houston says 75% of the 390 property-owners were granted premium relief, and more than 50% received cuts of 10% or more thanks to this “proactive and innovative work”.

He says the re-entry of Suncorp does not pose a major threat, because CGU never left north Queensland and Suncorp is pursuing lower-value business. Longer term, recent entrants may exit the market due to the complexity of managing relationships with owners and strata managers and staying on top of different state legislation.

“I think strata is one of those products where you really do need to specialise,” Mr Houston said. “It is niche and there are unique aspects to the strata market that are not fully appreciated.”