The Australian Consumers Insurance Lobby (ACIL) has published the findings of a nationwide survey on strata insurance, which the consumer watch dog says pinpoints major concerns related to the industry.
The survey, which was initiated on 20 March 2024, garnered 87 responses. The ACIL said its findings affirm previous concerns that had already been voiced while revealing new issues.
The survey came in the wake of an ABC report that led to public outcry on strata practices, including alleged overcharging for insurance brokerage fees and conflicts of interest.
In response, the Strata Community Association Australasia (SCA) announced it was advancing its reform timetable (see story below).
Known Concerns
The ACIL said the survey had again highlighted a series of problematic practices within the strata insurance industry. These practices, long identified and reported, continue to undermine trust and confidence in the sector, the ACIL said.
Among the key issues reaffirmed through the survey are breaches of fiduciary duties by strata managers, excessive and unreasonable remuneration models, lack of informed consent on broker appointments, and the employment of questionable arrangements by insurance brokers.
Further concerns include reports of delayed renewals, coercive tactics by strata managers, cross-subsidisation of remuneration, lock-in contracts, and misleading representations.
“ACIL has consistently voiced, underscoring the pervasive nature of these issues and their detrimental impact on the trust and confidence stakeholders place in the industry,” the report said.
New revelations
Beyond existing concerns, the survey also brought to light new revelations, the ACIL said.
One key concern of the findings was the identification of bad actors within the industry, with five strata managers and five insurance brokers now under ACIL’s investigation for engaging in potentially questionable practices.
The survey also raised concerns about supply chain ownership conflicts, where a single company owns multiple facets of the strata management process, potentially leading to conflicts of interest and inflated costs for consumers.
Among other issues were concerns around defect inspections, inappropriate relationships with developers, and inflated maintenance & repair quotes.
“These findings shed light on deeper systemic issues and conflicts of interest that may compromise the
integrity of services provided to consumers,” the report said.
Advocacy for Government Inquiry and Regulatory Oversight
In light of the findings, ACIL has called for the urgent need for a government-led inquiry into the strata management industry that extends beyond the narrow confines of strata insurance.
“Such an inquiry would not only signify a pivotal step towards rectifying long-standing issues but also serve as a testament to the government’s commitment to upholding consumer rights and fostering an environment of trust and integrity in the strata management industry,” the ACIL said in its report.
The consumer body also called for a change in ethics and professionalism from the strata industry.
“The industry must embrace comprehensive reform, prioritising transparency, accountability, professionalism and ethical practices. This transformation requires more than just adherence to legal standards – it calls for a cultural shift towards placing consumer interests at the forefront of all decisions,” said the report.
