The Trowbridge review of strata insurance has highlighted that cover offered to owners corporations (OC) for residential buildings should be treated as retail policies “with all their associated disclosure and other regulatory obligations”.

The retail classification would apply unless the complex has more than 50% of its floor space developed to commercial lots, in which case the OC could be regarded as a wholesale client.

The 50% criteria is not referred to in the Corporations Act or regulation, but the report says precedents include the definition in the new cyclone reinsurance pool legislation, and the approach should apply irrespective of whether there are 2, 200 or 2000 lots.

Report author John Trowbridge recommends that “for the avoidance of doubt over the retail client status of OCs” the National Insurance Brokers Association (NIBA) should modify Clause 6.1 (a) of the new Code of Practice on disclosing remuneration by adding an explicit reference to OCs.

Currently, the clause, which will take effect from November next year following a 12-month delay, refers to whether the client is an individual or a small business.

Mr Trowbridge says that during his review it was also not always evident to brokers that the client was the OC, rather potentially being both the OC and the strata manager, or just the strata manager.

“It should be evident to all that the insured, being the OC, is the client but there is a common misunderstanding otherwise,” the report says.

The report recommends standard templates that contain a minimum set of eight items should be introduced to improve disclosure around broker and strata manager fees and commissions, as well as other costs of insurance.

Brokers and strata managers should ensure “timely transmission of quotations and invoices” to the owners during the annual renewal process, it says, and there should be more information on the scope of services provided by the intermediaries and a full explanation of commercial relationships.

The report proposes that Strata Community Association (SCA) and the NIBA should establish guidance notes or practices standards in self-regulatory responses to the recommendations.