A broker has been cleared by the Australian Financial Complaints Authority (AFCA) after a former client alleged it recommended insurance that offered a higher commission rather than better coverage, deliberately delayed the claims process and failed to fulfil its professional duties.

The former client, an owners’ corporation for a residential strata property, said in its complaint that Body Corporate Brokers had a conflict of interest as it was receiving commissions for arranging insurance.

It complained it was not informed of the commissions, nor of fees received by the broker for services rendered over the past six years, and wanted the broker to reimburse the money.

But AFCA has dismissed the complaint, ruling the client was made aware of and agreed to the commissions and fees; the broker did not breach its duty of care or cause the client any loss; and the broker did not inappropriately manage a claim for water damage to the property.

It says documents provided show the broker gave the owners’ corporation’s appointed strata manager the annual renewal submission forms setting out the amount of commission and broking fees if the recommended policy was accepted.

These renewal forms would have been available to the owners’ corporation as part of the annual general meeting minutes when lot owners voted on whether to accept the insurance recommended by the broker.

AFCA says the “complainant was informed of the fee and commission payable each year prior to confirming its acceptance of the insurance offered. By selecting the insurance offered through the broker and paying the premium and broker fee identified, I am satisfied the complainant agreed to the commission and fee arrangement offered by the broker for its services.”

The authority acknowledges the broker fee was not included in the 2019 renewal form and says this was most likely human error.

It says this did not cause the complainant loss because it accepted and paid the broker fee in two previous and three subsequent years. “And there is nothing to indicate it would have taken a different course in 2019.”

The owners’ corporation said it obtained a superior policy at a much lower cost, including cover for flood, storm and storm surge, after it parted ways with the broker. It said this showed the broker had failed to act in its interests.

But AFCA says the onus is on the owners’ corporation to select the policy that suits its needs, and a cheaper policy does not indicate the broker recommended inappropriate insurance or failed to consider the complainant’s needs.

The broker’s renewal submissions included comparison quotes from different specialist strata insurers, and it generally recommended the insurer with the most competitive premium and excess. Comparison tables for the last three renewal submissions showed the broker would have received either the same or a higher fee if recommending the most expensive cover.

“This does not indicate the broker disregarded the complainant’s interests in favour of its own financial interest,” AFCA said.

On the alleged mishandling of the water damage claim, the authority says the broker acted in a way that considered the owners’ corporation’s interests.

The client said the broker advised it to arrange a report on the cause of water damage to balcony ceilings, but it then found out from the insurer that an assessor would be sent to inspect the damage. The broker’s action showed it was not “transparent” about options available, the client claimed.

But AFCA disagrees. It says the broker acted according to the claim manual and provided a reasonable basis for its recommendation.

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