Trowbridge releases part two of strata insurance market review

Industry expert John Trowbridge has released the second part of his independent review of the Australian strata insurance market.

The independent review aims to evaluate elements related to strata insurance, including strata management, insurance broking, and insurance underwriting. The first part, released in April 2022, focused on intermediaries’ disclosure practices.

The second part focuses on the remuneration of intermediaries and possible reforms. It aims to identify disclosure limitations and recommend ways to achieve transparent disclosure for strata property owners and their strata committees. It also shows Trowbridge’s findings and recommendations following his consultation paper’s submissions and discussions with interested parties.

The paper found that, where strata managers and brokers are involved, the strata insurance market’s unorthodox structure is:

Convoluted because part or all the commission is frequently paid to the strata manager, while a separate broker fee is charged to remunerate the broker for their services;
Complicated because not all the commission is frequently rebated to the strata manager, with the remainder being retained by the broker; and
Compounded in many cases by opaque or incomplete disclosure to the owners’ corporation of insurance-related transactions.

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In the second part of this independent review, Trowbridge suggests that:

Financial disclosures in the form of broker quotations and invoices be prepared by reference to standard templates containing a minimum set of eight items with standard definitions;
Brokers and strata managers ensure timely transmission of quotations and invoices to the strata community during the annual insurance renewal process;
Broker presentations and quotations be accompanied by a statement of the scope of services by the strata manager and broker and by a full explanation of commercial relationships between the strata manager and the broker; and
The Strata Community Association (SCA) and the National Insurance Brokers Association (NIBA) consider the recommendations and give effect to decisions they take on a self-regulatory basis by establishing guidance notes or practice standards for their respective members.

The third part of Trowbridge’s independent review, to be released soon, will focus on competition, affordability, and availability of strata insurance in Australia.