Strata owner and consumer groups have urged the NSW government to press ahead with the removal of strata manager insurance commissions. 

The proposed reforms are needed to restore trust and transparency, the Owners Corporation Network and the Australian Consumers Insurance Lobby say. 

A letter to Better Regulation and Fair Trading Minister Anoulack Chanthivong and NSW Fair Trading commissioner Natasha Mann argues banning the commissions will level the playing field.

“Consumers will be able to compare fees more clearly and make informed choices based on value and service,” the letter says. “While we acknowledge the transition may present challenges for some businesses, the current model is fundamentally broken.” 

Strata management company PICA Group last week warned profitability in the sector is falling and a sudden removal of the commissions could pose an “existential threat”, and lead to worse outcomes for property owners. 

PICA CEO Bobby Lehane says owners are highly price-sensitive on strata management fees, reducing the ability to increase the fees if commissions are removed. 

The NSW government last year asked Fair Trading to consult on a potential strata commissions ban after passing reforms to improve transparency around remuneration and related companies and increase oversight. 

“The government’s own investigations have exposed extensive misconduct in strata insurance,” Owners Corporation Network policy director Karen Stiles said. 

“These practices have cost lot owners dearly – in trust, transparency and inflated premiums. The proposed ban on commissions is a vital step towards restoring integrity in the system. We cannot allow commercial interests to undermine consumer protections.” 

Consumers Insurance Lobby chair Tyrone Shandiman says reforms can be introduced without the strata management sector falling apart, while education will be required so owners understand changes. 

“People aren’t just looking for the lowest price,” he said. “There are a lot of firms out there that don’t sell themselves on the lowest price; they sell themselves on service and expertise.” 

The reform would ensure management companies are not undercut by those with hidden fees and would end strata manager conflicted relationships, he says. 

“When they are conflicted, they are not necessarily finding the best deal for consumers,” he told insuranceNEWS.com.au. “Consumers will win.” 

Strata underwriting agency CHU’s CEO Kimberley Jonsson told an investor briefing recently that NSW Fair Trading had been taking a more measured approach as it became more aware of the importance of commissions to the strata management sector. 

If changes were made, they would need to “give some runway to the strata managers to replace that income”, she said.