Strata management company Netstrata says an independent report shows it has not overcharged for insurance services, while a consumer group has raised concerns over the review’s methodology.

Netstrata says the report finds charges are “at or below typical market rates” for a range of services provided via subsidiaries, and owners’ corporations using its wholly owned broker Strata Insurance Services (SIS) typically pay less for their insurance.

The company has contested most of the potential breaches listed in the McGrathNicol report, released yesterday by NSW Fair Trading, which commissioned the review as part of a broader investigation.

The business also says it has implemented nine of 22 recommendations.

“Netstrata acknowledges that the report has identified some areas for improvement,” it says. “Our customers are our top priority, and we will keep them informed of the changes we make to increase transparency and deliver better outcomes for them.”

Failings identified included non-disclosure of commissions and relationships, not obtaining at least two quotes for expenses exceeding $30,000 and charging extra to strata plans that did not use SIS.

“On multiple occasions, Netstrata’s own interests appear to have trumped the interests of the people it had a duty to act on behalf of,” NSW Fair Trading commissioner Natasha Mann said.

McGrathNicol says broker fees for SIS ranged between 5% and 69% as a proportion of base premium values, with fees representing a higher proportion where the premiums tended to be of a lower value. Five out of 60 clients in the review sample were charged 47%-69%.

The report says SIS adopts the “net method”, where only a broker fee is charged, and which presents fees as a higher proportion of premium price than the gross method, where a commission is shared by the broker and strata manager.

“When factoring total insurance costs (i.e. insurance premiums, brokerage fees and statutory fees), the average invoice amount for SIS is lower than other insurance brokers within the top 10 insurance providers,” the report says. “On this basis, it appears that the total insurance costs associated with SIS generally reflect market costs.”

Netstrata receives a business service fee, management fee and facility fee from SIS.

“These fees appear to be outside the scope of commissions or training services received in connection with exercising the functions of an agent for a strata scheme and would not be the subject of disclosure under section 60 of the SSMA [Strata Schemes Management Act 2015],” the report says.

The strata plans selected by the independent review represent about 5% of all plans managed by Netstrata.

The Australian Consumers Insurance Lobby has raised concerns over potential gaps in the review’s methodology and findings, including concerns over sample selection, unexplained cost reductions, and whether lot owners provided informed consent when engaging SIS. It questions whether fees were reduced only after the company faced regulatory scrutiny.

Lobby chairman Tyrone Shandiman says it is unacceptable for 8%-9% of consumers to be paying excessive brokerage fees of 47%-69% without further scrutiny.

“If proper processes under the Strata Schemes Management Act were not followed, and lot owners did not provide informed consent, then this is a serious consumer protection issue,” he said. “NSW Fair Trading must now step up and prove it is a tough cop on the beat. This report does not provide the full picture, and strata owners deserve transparency, accountability and consumer protection.”

Click here for the full report.

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