Insurers, brokers and consumer groups have backed the NSW government’s plan to tighten laws on strata commission disclosure and other practices that have raised concerns around transparency and conflicts of interest.

The state announced the proposed reforms last week. They include raising maximum penalties and penalty infringement notice amounts around strata managing agents’ obligations to disclose commission information.

The changes would also introduce a ban on agents taking a commission when they do not play a role in finding the best deal for strata residents.

The Insurance Council of Australia has welcomed the measures, saying it will continue to work with government and consumer groups to support improved transparency and restore public confidence in strata living. 

The National Insurance Brokers Association says it is imperative that the strata sector operates “transparently and fairly” as demand for high-density living continues to grow.

“These changes will ensure that all stakeholders in the strata sector operate with integrity and accountability,” NIBA CEO Richard Klipin added. “We believe that increased transparency will build greater confidence among strata owners and residents.”

He says insurance brokers play a crucial role as trusted advisers in the strata sector, providing expert guidance and arranging insurance to protect residents from a variety of risks. “By navigating increasingly complex insurance markets and advocating on behalf of their clients, brokers help to enhance transparency and safeguard strata communities.”

Australian Consumers Insurance Lobby chair Tyrone Shandiman, who has been pushing for improved strata practices, says the proposed measures “are a step towards enhancing transparency and stamping out unethical behaviour” in the sector.

“We view this moment as a pivotal opportunity to ensure the right outcomes for consumers are in place, overcoming the significant issues that have publicly tarnished the industry,” he said.

“The devil will be in the detail.”

Strata Community Insurance MD Paul Keating welcomes measures that improve transparency and sector-wide practices but is concerned over what “best deal” means.

“If that means the cheapest, that would be a real concern, because it should be based around value,” he told insuranceNEWS.com.au. “Any regulation must ensure there is a focus on ‘value’ rather than just price. It is vital that any new regulations maintain a sharp focus on the value provided and not just the cost. The cheapest option is not always the best, particularly in insurance, where coverage adequacy and service quality are paramount.”

Mr Keating says it is important for strata insurance brokers to lead the transparency push within their submissions to strata managers. "It is their paperwork that gets presented to committees, and they have the opportunity to raise awareness of embedded fees and/or commissions with remuneration arrangements upfront. We all need to help the strata management sector improve owners’ confidence through transparency of arrangements."

Consultation on the draft laws with stakeholders including the Owners Corporation Network and Strata Community Association will start in the coming weeks, and the state parliament will consider the new laws later this year.

The government announced the shake-up after some in the strata sector were called out for charging excessive fees for insurance services without fully disclosing details of the arrangements.

Strata Community Association NSW, the peak body for the sector in the state, also backs the changes. “The SCA has long advocated for sensible and progressive regulation in NSW that will improve practices across the entire strata sector – for the benefit of consumers and the sector alike,” it said.