NSW cracks down on strata managers with tough disclosure laws
NSW cracks down on strata managers with tough disclosure laws | Insurance Business Australia
Property
NSW cracks down on strata managers with tough disclosure laws
Consumer advocacy group welcomes proposed legislation
Property
By
Roxanne Libatique
The New South Wales government is set to introduce new legislation imposing stringent disclosure requirements on strata managers, particularly concerning the handling of insurance commissions.
The legislative proposal, which the NSW government claimed to be one of the most rigorous in Australia, follows a series of concerns raised by the public and regulatory bodies, including issues highlighted by the Australian College of Insurance and Law (ACIL).
NSW proposed disclosure obligations for strata managers
Ban on unapproved benefits
Strata managers will be prohibited from accepting benefits related to insurance contracts unless they are commissions or training services explicitly outlined in their agency agreements, approved by the owners corporation, or fall under a $60 gift threshold.
This provision seeks to address concerns from ACIL about non-transparent remuneration practices, such as advance commissions and profit-sharing schemes.
Limits on commission claims
Strata managers will not be allowed to claim commissions on insurance policies if the owners corporation has independently sourced quotes and arranged insurance coverage.
ACIL has previously raised concerns over contract clauses that penalise owners corporations for not selecting the strata manager’s preferred insurer.
Conflict of interest disclosures
The proposed legislation will require strata managers to confirm that any benefits they accept do not conflict with their obligations under the Property and Stock Agents Regulation 2022, which mandates that managers must not place their own interests above those of their clients.
ACIL has frequently called out strata managers for neglecting their fiduciary duties.
Greater transparency on conflicts of interest
Strata managers will need to provide more detailed disclosures to committees about any potential conflicts of interest. This move is intended to ensure that owners corporations are fully informed before making decisions.
ACIL has pushed for more stringent requirements around informed consent in these situations.
Detailed premium disclosures
Insurance quotes provided to strata schemes will need to include a detailed breakdown of the premium, reflecting recommendations from industry experts such as John Trowbridge on improving disclosure practices.
Timely delivery of insurance quotes
Strata managers will be required to provide insurance quotes to owners corporations in a timely manner, ensuring that there is adequate time for review and decision-making.
ACIL has noted that delays in providing quotes have often left owners corporations with little time to make informed decisions.
Increased penalties for non-compliance
The legislation proposes higher penalties for strata managers who fail to adhere to these new rules, aiming to enforce stricter compliance across the industry.
ACIL supports proposed disclosure requirements on strata managers
ACIL chairperson Tyrone Shandiman has expressed support for the proposed legislation, noting that it addresses several issues that the organisation has been advocating for.
“ACIL consulted closely with NSW Fair Trading during the drafting process, and we are pleased to see that several of our key concerns have been incorporated into the draft legislation,” he said.
He mentioned that these reforms could lead to significant changes in how strata managers operate, requiring many to reassess their business practices.
ACIL teams up with NIBA to address misconduct concerns
ACIL is shifting its focus to similar issues in other states and is currently engaging with the National Insurance Brokers Association (NIBA) to address misconduct concerns involving insurance brokers.
According to Shandiman, the unethical practices identified often involved brokers who failed to act in the best interests of their clients.
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