Strata Insurance Facts. The Impact of Insurance Premium on your OC Budget.

mark41415
Aug 20
2 min read

The strata insurance premium is the most significant expense in an Owners Corporation's (OC) budget. Know how much commission you're paying.

There has been a lot of attention put on strata insurance recently, its impact on body corporate levies paid by owners, commissions paid to brokers and Owners Corporation Managers amid accusations of conflicts of interest. Understandably, owners are concerned about the impact insurance commissions paid have on the cost of running their Owners Corporation.

There are calls from some lobby groups to do away with insurance commissions being paid to Owners Corporation managers, but it’s not that simple. Commissions form an integral part of managers’ revenue model, and, without them, managers will need to find alternative revenue streams. This could be raising their base management and disbursement fees or charging for more service items, known as 2.2 fees, that are currently included in their base management fee.

Who Receives Commission?

So, why do Owners Corporation managers receive commission on the insurance they place for their clients? The attached information prepared by the Insurance Council of Australia provides insights into the strata insurance industry, who gets what and why they get what they do.

Interestingly, despite most owners believing they pay more for their building insurance because it's placed by the manager on behalf of the Owners Corporation the ICA article states that strata insurance generally costs owners less than if each owner were to place their own building insurance if that were possible.

Despite the payment of commissions to the broker and manager for placing the insurance and managing claims which, when the claim involves the common property, also means the manager manages the repair works. Seems there remains benefits for owners with strata insurance.