The Australian Consumers Insurance Lobby says it is discussing "concerns about misconduct" among strata brokers with the National Insurance Brokers Association.

The talks follow a crackdown on strata managers in NSW after some allegedly charged excessive fees for insurance services without fully disclosing details of the arrangements. 

“Many of the problematic actions could not have occurred without the complicity of insurance brokers who failed to act ethically or in the best interests of their clients,” said the lobby group, which plans to examine strata practices in other states. 

The Strata Managing Agents Legislation Amendment Bill 2024 was put before the NSW parliament this month.

It includes bans on strata agents receiving commissions on insurance products when they do not play a role in finding the best deal for property owners.

The reforms aim to end “secret kickbacks on insurance policies and [weed] out bad players”. The NSW government plans to impose higher penalties and greater disclosure obligations on strata managing agents. 

The bill notes “troubling instances of strata managing agents taking advantage of strata owners. These include owners’ corporations being charged excessive fees when securing strata insurance for their buildings; agents being swayed to buy products from certain companies over others because they get a benefit, such as a commission; and agents using the services of related entities to obtain financial benefits without the knowledge of the owners' corporation.”

ACIL says the NSW measures are a “crucial step forward” and the “groundbreaking” legislation addresses key concerns, imposing the nation’s strictest obligations on strata managers around disclosure of insurance commissions.  

Strata managers will be prohibited from receiving benefits related to insurance contracts, other than commissions or training services included in their agency agreements and approved by the owners’ corporation, or gifts under a $60 limit.  

“This addresses ACIL’s concerns about unclear remuneration practices, including advanced commissions and profit-sharing arrangements,” the lobby group said.

Strata managers will be restricted from claiming commissions for insurance policies when the owners’ corporation has independently obtained quotes and arranged the cover, so owners will not be penalised for not using the strata manager’s preferred provider.

Managers must declare that accepting benefits from an insurance policy does not contravene a rule that they do not put their interests in conflict with their clients.  

Insurance quotes will be required to include a full breakdown of the premium and be provided to owners’ corporations as soon as practicable.

ACIL says the proposed reforms will compel many strata managers to change how they conduct their business, which is a “significant win” for consumers. 

“It is encouraging to see the government take decisive action on this critical issue,” ACIL chair Tyrone Shandiman said. “The diligence with which regulators have pursued these matters is commendable.”

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