The Australian Consumers Insurance Lobby (ACIL) has called for improved oversight of the way strata managers appoint brokers, amid concerns property owners are being kept in the dark about changes that sharply increase fees and commissions.

ACIL Chairman Tyrone Shandiman says strata managers, who are not the insurance clients, can switch brokers and enter arrangements that provide the managers with higher remuneration via letters of appointment. 

The group has been in touch with the National Insurance Brokers Association (NIBA) and the Insurance Council of Australia over strata sector processes. 

“We have put our concerns to them, and we are recommending that they increase oversight to ensure appointments validly represent the instruction of the body corporate,” Mr Shandiman told insuranceNEWS.com.au. 

The group has highlighted several areas in which it believes NIBA should gain advice. “One is, can an authorised representative of a broker represent the owners’ corporation, stamp and sign a letter of appointment while they are acting for that broker they are appointing,” Mr Shandiman said. 

ACIL has presented the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission with 146 examples of what it believes is misconduct involving the unlawful appointment of brokers by strata managers.  

The group has also asked the regulators to consider a broader, industry-wide investigation. 

ACIL says disclosure is frequently inadequate at the time broker appointments are made, often owners are not reviewing cover until the renewal is presented to them, they may be unaware of higher fees and commissions, and there’s a lack of informed consent. 

Strata Community Association (SCA) in December produced a best practice guide for managers that aims to improve disclosure around commissions, conflicts of interest and the allocation of remuneration. 

It says the complexity of strata insurance, including the appointment of brokers and delegated authority, makes it difficult to judge each case without knowledge of the full circumstances. 

“However, we find the public, unsubstantiated comments regarding monetary values and associated actions intentionally alarmist and unhelpful to achieving better outcomes for consumers,” a spokesman told insuranceNEWS.com.au. 

SCA says it continues to work with underwriters, brokers, software providers, strata management firms, consumer groups and industry bodies to improve outcomes for consumers.