In our latest Strata Newsletter (2 March, 2016) we included an article about insurance commissions published by the Townsville Bulletin – Insurance advocate calls on State to ban manager’s commission.
From the article: SECRET third-party commissions of as much as 20 per cent being paid by insurers to body corporate managers are costing unit owners thousands of dollars extra in premiums and should be banned, North Queensland insurance advocate Margaret Shaw says.
Knowing it would be a controversial topic across the strata world, we chose to include the article in our newsletter in order to inform our members of its existence and open discussion on the matter.
There has been a buzz in the industry around this topic for quite a while:
Not long after publishing our newsletter, I received the following response from Greg Honeyman, Strata Specialist, MBCM Ballarat:
“Secret” Insurance Commissions? I don’t think so!
This article requires some serious refutation, and the advocate Margaret Shaw really should get her facts together.
In Victoria, for professional Owners Corporation Managers who are members of the peak industry body (SCA Vic), any insurance commissions are absolutely transparent. In fact, at every AGM (and whenever body corporate insurance is discussed), we provide a disclosure statement to all owners. To make an across-the-board accusation of secret commissions is for Ms Shaw to tread on extremely dangerous legal territory.
It is accepted by all right-thinking owners that the payment of insurance commissions to professional managers does not cost unit owners more. Quite the opposite in fact. The current practice keeps costs down. Professional managers undergo training in strata insurance products and are viewed by the insurance industry as a key part of the insurance process, particularly in ensuring that competitive quotations are carried out properly and that owners receive the best possible insurance coverage for their needs at the best possible prices.
Without these professional managers, the insurance companies would have to employ large numbers of sales staff to carry on the job of quoting and providing the correct form of insurance to the many thousands of strata properties in the country. This is what would end up costing the owners more. Not only that, but I have serious doubts whether owners would then end up with the correct insurance.
Strata insurance is incredibly specialised. The best people to interface with owners corporations are the professional managers who know the properties and know the owners. The system that is currently in place is the best possible system, and any commissions are hard earned.
Generalist, sensationalist and inaccurate comments by people like Margaret Shaw will result in the worst possible outcome for owners of units in strata communities, both in terms of the quality of insurance and cost. And to expect owners to arrange their own insurance is a recipe for problems, increased cost and potential disaster. The best possible strata insurance is a single blanket cover through one insurer.
I would agree with Ms Shaw however where it comes to strata managers who are unprofessional, unregistered or not members of the industry peak body. Our profession has no place for cottage industry amateurs or shoddy performers.
As an industry leader, the MBCM group is passionate about ensuring professionalism and transparency in everything we do. We have 48 members in our franchise group and all are members of the SCA (Vic). My sympathies go out to Ms Shaw and her colleagues if they have been the unfortunate recipient of poor management practices.
The industry has seen far too many Owners Corporations which have attempted their own insurance and ended up with a disaster on their hands:
- Under insurance (and in some cases gross over-insurance).
- Conjoined units insured by separate insurance companies (fertile ground for dispute in the event of a claim).
- No common property insurance (exposing owners to personal liability).
- Expired insurance (I am dealing with one of these as we speak, where they simply forgot to renew – 15 months ago).
- Non-existent insurance (it won’t happen to me).
Professional managers ensure that Owners Corporations are protected and insured properly and in a timely manner.
For the record, I have attached the MBCM strata management disclosure.
DISCLOSURE OF INSURANCE AGENCY FEES AND COMMISSIONS
The purpose of this memorandum is to facilitate uniform disclosure of insurance agency fees and commissions received by Owners Corporation Managers who are members of Strata Community Association Victoria and who comply with the conditions set out below.
Strata Community Association endorses the current practice of Managers deriving insurance commissions on insurance premiums paid on behalf of Owners Corporations as this contributes to a lower level of management fees and has no effect on the cost of insurance to the Owners Corporation. The conditions applicable to endorsement by the Institute are as follows:
- Such fees and commissions are properly disclosed to clients.
- Such fees and commissions do not increase the cost of insurance to Owners Corporations.
- Such fees and commissions do not exceed 20% of total premium payable by Owners Corporations.
- In all cases the best interest of the client is the paramount criterion when presenting quotations from particular insurance companies or placing insurance with any insurance company or broker.
The level of insurance agency fees or commissions by Owners Corporation Managers varies and it rarely reaches the limit set in condition 3 above. This upper limit of such income has been specified in this memorandum to simplify the process of disclosure.
The distribution of this document by the Manager to the Owners Corporation clients will serve as an announcement that such income is being received and that there is compliance with the restrictions as set out above.
We encourage discussion about this topic and hope you decide to contribute.
Still after more information about insurance commissions, even more general articles about strata insurance or information about strata living in your state or territory? Visit our FactSheet: Strata Insurance OR Strata FactSheets by State.