Strata Community Association (SCA) has produced a best practice guide that aims to improve disclosure in areas such as commissions, conflicts of interest and the allocation of remuneration.

The release of the guide comes after recommendations made by consultant John Trowbridge in the first phase of an independent review of strata insurance practices and draws on previous work commissioned by the SCA.

“We are implementing a system that ensures that practices are transparent, and consumers are provided with enough information to make informed choices,” SCA Australasia President Chris Duggan said today. 

“The insurance services provided by strata managers, brokers and underwriters is not always simple and straightforward, but their interaction is critical to achieve positive outcomes, and will only be improved by the introduction of this guide.” 

SCA says the guide includes a simple three-step “disclose, document, communicate” process, templates to standardise information presented to strata committees, the disclosure of all commissions, conflicts of interest and the allocation of remuneration between parties, and easy to read information for communications with consumers.

Mr Trowbridge say the guide’s content follows closely the recommendations in his paper regarding transparent disclosure of strata managers’ own remuneration and that of brokers they use, and is explicit about the “disclose, document, communicate” principles.

“These steps are rightly aimed at obliging strata managers to go beyond the written word to assist actively in improving the understanding and education of strata managers, their body corporate clients and brokers,” he said.

“Standardisation and professional obligations of strata managers deriving from the Best Practice Guide have the potential, to simplify and demystify the strata insurance process.” 

But the Australian Consumers Insurance Lobby (ACIL) says the guide falls short on requirements that would provide greater protections, and it’s seeking an industry-wide ban on commissions and financial benefits to strata managers.

Chairman Tyrone Shandiman says the group is particularly concerned about remuneration models that involve a 20% commission and a 20% fee, and the potential for strata managers to tender based on low strata fees that are then offset by monies received for other services such as insurance.

ACIL says owners committees can be moved onto such arrangements without realising, some managers may overstate the level of service they are providing for their remuneration, and the group plans to step up its advocacy for improvements across the sector.

“We are going to start looking to refer some concerns and issues to regulators,” Mr Shandiman says in a video. “Unfortunately, there are just too many instances in this industry where strata managers are taking actions that do not pass the pub test.”

SCA says it wants to elevate SCA members in the eyes of strata committees and consumers and eliminate some of the poor practices and bad actors who undermine confidence, and the guide will help improve relationships.

“There is widespread support across the industry for this initiative that has been won over the last nine months, as we consulted across all of the major strata underwriters, brokers, software providers, strata management firms, our specially formed strata insurance taskforce and each of the state and territory SCA boards and executive chapters,” Mr Duggan said.

“We’re setting an achievable timeframe for implementation and compliance, and we will be proactively engaging and training our members in the guide, which will become the practice standard for SCA members, and will become a component of membership.”