Strata Community Association (SCA) has rejected criticisms from the Australian Consumers Insurance Lobby (ACIL) in the wake of the release of a new best practice guide around remuneration disclosure. 

ACIL says it will look at referring certain strata insurance remuneration practices to regulators and will consider litigation options around the issues following concerns that the document doesn’t go far enough in stamping out problems. 

SCA Australasia President Chris Duggan says the group is “disappointed with the lack of understanding displayed by ACIL” in its criticisms of the guidelines. 

“Once implemented, these guidelines will improve committee oversight, transparency, communication and understanding, the very improvements ACIL has previously sought,” Mr Duggan said today. 

SCA says its Strata Insurance Disclosure Best Practice Guideline aims to address many of the disclosure issues raised in the first phase of an independent review conducted by consultant John Trowbridge. 

The guide promotes the inclusion of the eight financial items that should be transparently disclosed, templates to achieve standardisation of information presented to strata committees, and the disclosure of all commissions, conflicts of interest and the allocation of remuneration between parties. 

Mr Duggan says the guide is a progressive and significant collaboration, and the group has consulted and worked alongside the National Insurance Brokers Association (NIBA), strata bodies nationally, regulators, researchers, experts, consumers and underwriters to formulate its approach and actions. 

ACIL is particularly concerned about remuneration models that involve a 20% commission and a 20% fee, and the potential for strata managers to tender based on low strata fees that are then offset by monies received for services such as insurance. The group says strata committees are made up by volunteers and are vulnerable consumers in the process. 

Chairman Tyrone Shandiman says the industry is not able to effectively self-regulate on commissions and the group’s calling for a ban on their use across the strata sector. 

“A call for a ban on commissions doesn’t end there for our organisation. It is only the beginning,” Mr Shandiman says. “Unfortunately, there are too many instances in this industry where strata managers are taking actions that do not pass the pub test.” 

The strata sector review by Mr Trowbridge, commissioned by Steadfast, highlighted that where strata managers and brokers are both involved, the unorthodox structure of the strata insurance market is confusing, with frequently part or all of the commission paid to the strata manager and a separate fee charged to remunerate the broker. Three papers were released as part of the review. 

Mr Trowbridge says the content of the SCA best practice guide follows closely recommendations in his paper regarding transparent disclosure of strata managers’ own remuneration and that of brokers they use. 

“It is explicit about three important principles for strata managers to apply, namely disclose, document, communicate,” he said. 

“These steps are rightly aimed at obliging strata managers to go beyond the written word to assist actively in improving the understanding and education of strata managers, their body corporate clients and brokers.”  

Groups consulted on the SCA guide included NIBA, which has also been promoting transparency on remuneration with its members. 

“Strata is an important area where we feel the 2022 Insurance Brokers Code of Practice introduces specific steps and disclosures to increase broker communication and transparency and improve consumer protections,” NIBA CEO Phil Kewin told insuranceNEWS.com.au.