Question: Our insurance premium and broker fees seem too high for a complex of standalone units. Can we challenge the costs or switch brokers?
Our owners corporation has 34 standalone brick units, each completely separate from the others. Because we’re not a multi-storey complex, we don’t believe we face the same claims risks, yet our insurance premium seems excessive.
We also have no choice of broker. Our insurance goes through a broker chosen by our owners corporation manager. We believe the strata manager earns significant commission from the arrangement. Based on our own calculations from the latest premium, it appears the manager earns more than the broker does. We were also charged an extra $1,400 in broker fees this year.
In our view, insurance costs are getting out of hand. What can we do?
Answer: Decision-making authority on insurance broking sits with the owners corporation, though the agency agreement may set out costs for switching brokers.
With the limited information available, we’re unable to provide specific guidance. That said, in the current soft market, owners could generally expect premiums to stabilise or even reduce. This assumes your owners corporation has had no claims in the past 5 years, no known defects, and no ongoing legal proceedings relating to the property. It’s worth keeping in mind that several factors influence premium outcomes, including the building’s construction type, age, location, total sum insured, and occupancy.
Regarding the arrangement between the owners corporation manager and broker, we’d recommend reviewing the agency agreement between the owners corporation manager and the owners corporation, specifically the clauses relating to insurance. This will clarify whether there are any costs associated with switching brokers, or whether the owners corporation manager permits freedom of broker choice.
Ultimately, decision-making authority sits with the owners corporation. If owners collectively feel the current arrangement isn’t in their best interest, or want to explore alternative broking arrangements, they can act via a letter of authority. Owners can also request a review of the brokerage fee and commissions charged. We recommend raising this at the next owners corporation meeting.
This post appears in Strata News #814.
Eleni Svinos Cohabit E: eleni@cohabit.com.au
