Tag: Strata insurer

The Strata Manager’s Role: Does it require professional qualifications?

By Mary R.

This is not expert insurance, legal or financial advice. It is a suggested guide based on publicly available information in government and industry documents. Circumstances and legislation vary between Australian States and Territories, so committees should check the current requirements applying to their own strata building and obtain professional advice where appropriate. For this particular blog I am allowing useful input in comments. It should be general Australian insurance information only. This blog is independent and fully self-funded.

 

If you’ve just joined your first strata committee, there are two questions worth contemplating for a few minutes. The answers may affect how much you can rely on your manager’s advice and whether you can just accept it. Let’s start by tackling the first question.

Question One: Is a strata manager an administrator or a professional?

There two ways of looking at the strata manager’s role:

Administrator
An administrator generally:

    1. Carries out decisions made by someone else – typically in our case the committee – within the authority given to them by legislation or their service contract, which may allocate some decision-making tasks.
    2. Performs administrative functions such as processing payments, keeping records, issuing notices, circulating minutes, answering correspondence and arranging and/or attending meetings. Much of this work is repetitive and increasingly capable of being assisted by specialist software and AI.
    3. Does not necessarily need the body of specialised knowledge, formal education and supervised practical experience traditionally associated with a profession.
    4. In terms of amateur versus professional, are they also professional because they earn income for their work, similar to the difference between amateur and professional sportspeople?
    5. Admin officers and assistants are expected to act at all times in a professional manner, including with intergrity, reliability and in the best interests of their clients.

Professional
A professional, on the other hand:

    1. Exercises independent judgement and expertise that the client relies upon precisely because the service provider has both experience and a relevant tertiary qualification.
    2. Works within a body of specialised knowledge that has been stringently tested all the way through to recognised qualification levels.
    3. May be subject to higher professional standards and accountability through a regulatory or professional body with the ability to register and sanction its members.
    4. Spends a lot of their own time updating their knowledge and skills through various available avenues. Their knowledge base must always be current.

The Qld Government, on its web site is clear about it: a body corporate manager is engaged to provide administrative services to the body corporate. And this is the part that may surprise new committee members: there is currently no formal training or qualification of any kind required to do the job in Queensland. (Qld Govt)

Thus the Queensland description of a body corporate manager appears to fit the basic administrator model: the manager is there to provide administrative services and to carry out the body corporate’s decisions with integrity and efficiency, all of which does not require tertiary-level education.

But that is not necessarily how the role works in practice. Strata managers everywhere, not just in Queensland, routinely provide advice about legislation, contracts, insurance, disputes and the proper way for a committee to proceed. Committee members often rely on that advice because they don’t have the necessary specialist knowledge themselves.

And therein lies the problem.

If the manager is only an administrator, then the committee is often the one exercising the judgement and making the decisions. But what happens when the committee does not have the knowledge necessary to make that judgement? Someone must fill the gap. That someone is often the manager.

That doesn’t necessarily make the manager a professional in the formal sense. But it does mean that a role that is labelled administrative can also be performing functions that committees assume is carried out to professional standards.

And now for the second question.

Question 2: Should there be a minimum qualification standard before someone is entrusted with other people’s money and legal obligations?

The person your committee may rely on to interpret legislation, negotiate contracts, deal with disputes and manage funds may have entered the role with no more formal preparation than you had when you accepted your volunteer position.

Perhaps not even that. Some new committee members receive a “welcome” information pack or USB stick from the outgoing committee. It will usually contain, among other things, a clear outline of duties and how to provide good governance for your building, as well as other related topics.

I don’t think the answer here is particularly difficult. It is an argument about basic consumer protection.

Queensland currently sets no formal qualification bar but many strata managers pursue it themselves.

New South Wales is working towards requiring that to be classed as a strata manager after the preliminary “apprenticeship” period, the full Certificate IV in Strata Management is required.

Victoria has currently taken a middle-ground approach, but its requirement is only for part of the above Certificate IV – five units rather than the 18-unit full qualification expected in other jurisdictions. It won’t necessarily provide the level of knowledge that a committee needs.

So, Question One: administrator or professional – what is my answer?
I’m happy to leave that question open. It is a reasonable question, and there are arguments on both sides but titles alone don’t dictate the levels of competence.

I don’t think the question can be resolved simply by looking at the job description. The same day-to-day role can be viewed either way, and different states and territories have taken different approaches. The situation is considerably more complicated than simply saying that some states regulate managers more than others.

But I find the second question much harder to leave open.

So, Question Two: Should there be a minimum tertiary-level qualifications and training standards for strata managers?
In my view, the answer is yes. Queensland should have them, while New South Wales and other states already have them, will have them, or are reviewing their options. Victoria currently has a half-hearted approach, possibly still under review, which fails to provide committees with enough protection to trust their strata manager’s guidance and advice unequivocally. This is where Victoria, while intending to increase the level of trust that committees can place in their strata managers, must avoid ending up with a regulation that is riskier for committees if that increased level of trust is misplaced.

Strata Insurance and Why It Needs the Committee’s Input: Part One

By Mary R.

 

This is not expert insurance, legal or financial advice. It is a suggested guide based on publicly available information in government and industry documents. Circumstances and legislation vary between Australian States and Territories, so committees should check the current requirements applying to their own strata building and obtain professional advice where appropriate. For this particular blog I am allowing useful input in comments. It should be general Australian insurance information only. This blog is independent and fully self-funded.

Most strata management committees (SMCs) are not interested in becoming insurance experts. This is particularly the case in smaller strata-title buildings that may have three or less members on their committees.

But insurance is usually a major expenditure, and the SMC is approving that expenditure on behalf of all the lot owners. That is a reasonable ground for scrutiny and it is outlined in the following list of questions. They are not in order of importance and are intended as suggestions that can be reasonably asked of your broker.

1. Who is your insurance broker, and who owns it?
This is worth knowing because the broker’s name on renewal documents doesn’t need to tell us about its wider corporate structure. Within the insurance industry, a clear hierarchy shapes how capital, underwriting, and distribution interact. The broker’s role is to liaise with clients, collect at least three quotes, make recommendations and draw up the final insurance premium. That does not mean, however, that each level of the hierarchy is necessarily independent. In many cases there is an interlocking relationship, as a subsidiary, for example, of a “parent” company.

For example, Whitbread, a leading insurance broker, has a current Financial Services Guide (FSG) that states that Whitbread is a subsidiary of Steadfast Group Ltd. For strata insurance, it specifically states: “The following strata underwriting agencies we may utilise are also subsidiaries of Steadfast:

• CHU Underwriting Agencies Pty Ltd (inclusive of Flex Insurance)
• Axis Underwriting Services Pty Ltd

Additionally, Steadfast holds a minority interest in QUS Pty Ltd. (Whitbread FSG p.3) 

Whitbread expressly states that it operates independently and that its staff are not directed or incentivised to place insurance with Steadfast-associated entities. Other well-known underwriters with associated entities may make similar disclosure claims.

Read the FSG
An insurance broker’s Financial Services Guide (FSG) is worth reading before an SMC makes decisions about insurance. It explains matters in plain English, including the broker’s commissions and fees, relationships with underwriters, the capacity in which the broker is acting, and the procedures for complaints and disputes. For example: WhitBread: FSG;   Gallagher: FSG; Axis Underwriting

There are others as well of course, and some of them may include a disclosure statement on their website similar to this one:

“We are not independent, impartial, or unbiased pursuant to section 923A of the Corporations Act because:
• We may receive remuneration, commission, or other benefits when we provide personal advice to you in relation to insurance products and other financial products; and/or
• We may have associations or relationships with issuers of insurance products and other financial products.“

The chain between the SMC and the insurer looks like this:

Committee — Manager — Broker — Underwriter — Insurer & Premium Funder

2. Who is actually underwriting your insurance?
You know already that the strata manager and the broker may be getting either a commission or a fixed fee, but did you know that the underwriter may also be getting a commission? For example, CHU’s FSG (Current, pub. Jan. 2023) states:

Commission, profit share and other financial benefits/incentives
QBE pays to us [i.e. Chu] a commission for each policy issued or renewed. The commission amount is 12.5% to 30% of the base premium paid by you (excluding any government taxes, duties and levies). The commission amount is included in the total amount you pay for your policy and not in addition to the policy.

The underwriter’s role is long standing, to the point where it would be hard for the insurance industry to act efficiently without it. Underwriters manage and distribute insurance products for the insurer, although the precise arrangement varies. It is appropriate to have their commission or fee included in the base insurance premium. Some underwriting agencies are part of larger insurance groups.

When you are comparing three quotes and they differ, however, it is useful to know where that difference lies and how it was calculated. Again, keep a copy of your current underwriter’s Financial Service Guide (FSG). I have found the guides provided by underwriters useful. For example: Chubb: chubb-strata-insurance-pds.pdf

Potentially, we are about to see more expensive insurance policies due to climate change. Being fully aware of government taxes and duties, such as GST and Stamp Duty, as well as industry commissions and fees, will be increasingly important.

There is nothing inherently wrong with an underwriting agency sharing a business relationship with a broker or insurer, for example. What matters from a governance point of view is that the relationship is known and taken into account when considering the recommendation.

3. Who is being paid for their services, and how much?
This is probably the question that attracts the most attention. The broker’s insurance commission will vary, depending on the arrangement. The broker may also receive a commission from the premium funder, with its premium-funding commission range being, perhaps, 0–3% of the funded premium.

It has been a long-standing arrangement for the insurer to pay brokers a commission and the brokers could then, if they chose, divide it with strata managers, often splitting it half and half. This has changed in recent times, with the strata managers being given the whole commission in some cases, while the brokers charge separate fees.

If, however, the strata manager now decides to accept a set fee as outlined in their service contract, and that fee is equivalent to, for example, 10–20% of the base premium, the broker may still receive a commission from the insurer. Depending on the particular arrangements, this could increase the overall cost to the strata client.

NSW has been considering reforms to strata-manager commissions following a 2026 review by the NSW Productivity and Equality Commission. The review presented several options, including phasing out insurance commissions paid to strata managers.

NSW State Parliament

NSW  Govt

4. Who is the premium funder? Is the insurance premium being financed?
This is an easy one to overlook because it has its own entries in bank statements. If the premium is paid through a premium-funding provider such as IQumulate, the strata community is effectively borrowing money to pay the insurance premium upfront (as required) and then repaying the amount by instalments. It is broadly similar in concept to choosing to pay some other large annual expense by instalments, although premium funding is a separate financing arrangement and normally involves interest and fees.

Premium funding will become increasingly necessary in future if strata lot owners are to afford to pay their insurance policies without financial stress. Since insurance represents a very large proportion of annual expenditure, spreading the payment over ten or twelve months makes perfectly good financial sense.

But the committee should know the total amount it will have to pay, how many repayments and the interests charged for what is effectively a loan. One sighted example had a charge of 10% plus GST, based on the policy’s previously calculated total cost. And don’t forget the broker’s fee added to the premium funder’s percentage. This is an additional insurance expense that may not be included in pie charts and graphs.

5. Have we seen the actual policy — or only a Certificate of Currency (CoC)?
A CoC is useful, but it is not the insurance policy. It tells us that insurance exists and gives us some important basic information. But it does not contain all the detailed terms, conditions, exclusions, excesses and limitations that determine what we have actually bought. Nor does it contain the list of commissions, fees, levies, taxes and other charges that can substantially increase the amount ultimately payable.

Assuming that you are constantly being given just the CoC and not the policy, it is essential for an SMC to say something like this to the broker or strata manager if necessary:

“Thank you for the Certificate of Currency. We would also like a copy of the actual Policy together with its wording and schedule and with the complete payable amount, before we approve the renewal.”

The CoC tells us what we have insured and for how much. The policy ideally should list all expenses and add-ons.

6. Have you seen the three quotations?
If quotations have been obtained, the committee should see them. That doesn’t mean the committee has to choose the cheapest one. It should be able to compare the alternatives and understand why one was recommended by the broker over another and not just accept “this is the one we recommend”.

7. Is the insurer being given an accurate description of your building?
The SMC should be satisfied that the information being relied upon is accurate. When the broker issues a policy proposal for renewal, it is essential that the SMC receives a copy of that proposal so that they can check the accuracy of the previously supplied description of their building.

It is not unusual for SMCs to “rubber stamp” insurance documents. That is not good governance. They should be checked. It should include your building’s construction materials, the number of lifts, levels, basements and floors, additional amenities, estimated replacement costs and any risks or defects.