The Australian Consumers Insurance Lobby (ACIL) has asked regulators to investigate strata manager practices that it believes constitute misconduct.

ACIL has presented the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission with 146 examples relating to strata manager broker appointments and remuneration arrangements, and has asked the regulators to consider a broader, industry-wide investigation.

“We have some serious concerns and some specific examples, and we believe if there was a regulatory investigation they would uncover a significant amount of issues,” ACIL Chairman Tyrone Shandiman said.

ACIL says there are cases in which strata managers shift property owners onto unreasonably high remuneration models, which may involve strata managers sharing 20% commissions and 20% fees with brokers, without full transparency.

It has questioned whether strata managers’ authorisations to use an owners’ corporation common seal, which provides a legal signature, are being misused in making changes, and whether it’s appropriate for strata managers to be authorised representatives of brokers.

The Strata Community Association (SCA) says the complexity of strata insurance, including the appointment of brokers and delegated authority, makes it difficult to judge each case without knowledge of the full circumstances.

“However, we find the public, unsubstantiated comments regarding monetary values and associated actions intentionally alarmist and unhelpful to achieving better outcomes for consumers,” a spokesman told insuranceNEWS.com.au.

"This is particularly in light of ongoing engagement with Tyrone Shandiman in his capacity as representative of ACIL and good faith discussions around the significant changes in supporting more transparent insurance and informed strata consumers."

The association last year produced a best practice guide for managers that aims to improve disclosure around commissions, conflicts of interest and the allocation of remuneration, and the group says it has committed significant resources over the past four years to achieve better outcomes.

“SCA continues to work with all of the major strata underwriters, brokers, software providers, strata management firms, consumer groups and industry bodies to make positive changes to the strata industry to improve outcomes for consumers,” the spokesman said.

The group says its work has included adopting recommendations from a John Trowbridge report on transparency, commissioning research, representing the sector in the formation of the cyclone reinsurance pool, forming a dedicated national strata insurance taskforce and assisting the consumer commission in its inquiries into strata cover in north Queensland.

But ACIL says reforms are still needed and it would welcome talks on industry standards that address the consumer group’s concerns.

The group has also been in touch with the National Insurance Brokers Association and the Insurance Council of Australia over strata sector processes.

“We have put our concerns to them, and we are recommending that they increase oversight to ensure appointments validly represent the instruction of the body corporate,” Mr Shandiman told insuranceNEWS.com.au.

ACIL says it wants consumer redress where issues are found and suggests initial regulatory scrutiny could lead to further examinations.

“What could possibly emerge from this is a review into whether the way strata managers are remunerated for insurance is the appropriate way, given the significant conflicts and significant issues of unlawful activity that we are providing,” Mr Shandiman said. 

ACIL calculates that practices requiring investigation have contributed to consumer financial losses above $240 million.