Strata problems: Trowbridge points to “questionable” delegated authority powers
Strata problems: Trowbridge points to “questionable” delegated authority powers | Insurance Business Australia
Insurance News
Strata problems: Trowbridge points to “questionable” delegated authority powers
After ACIL’s accusations, does the sector need regulating?
Insurance News
By
Daniel Wood
Last week, the Australian Consumer Insurance Lobby (ACIL) called on regulators to investigate what it described as a “systemic pattern” of misconduct by strata managers in how they appoint insurance brokers.
On Monday, ACIL chair Tyrone Shandiman said both the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) have officially accepted the complaint and are considering how to respond.
“I got the impression they were taking this issue seriously,” said Shandiman to Insurance Business.
“Energising the strata insurance market: a blueprint for affordability, availability and competition” was intended, said Trowbridge, to facilitate a review of the industry in three phases. Broker commissions and charges were one focus of the review.
He concluded that the “opaque” brokers fee system should be phased out in the interests of transparency.
Trowbridge points to Strata Disclosure Handbook
IB asked Trowbridge for his response to ACIL’s allegations that included the “unlawful appointment of insurance brokers by strata managers” and brokers charging higher fees without the consent of the insured?
The industry veteran provided answers that he said, “more or less respond” to IB’s questions concerning whether strata managers and brokers are sometimes acting unlawfully or not complying with voluntary codes of conduct.
He referred to the Strata Insurance Disclosure Handbook, his reference guide based on his review. On page 17 of the handbook Trowbridge set out a series of steps designed to improve the way insurance brokers are appointed for strata insurance policies.
“In cases where there is a holding broker but the strata committee or the strata manager is contemplating a change of broker, there will be three additional tasks at the outset,” says the handbook.
Those steps include the Owners Corporation (OC) giving the strata manager (SM) instructions to find a new broker and, if that happens, the OC signing a formal Letter of Appointment for the new broker.
Trowbridge said these steps are “not common practice” and said “in some cases” SMs are appointing new brokers without communicating this to the strata committee because they believe they don’t have to under delegated authority.
Trowbridge questions delegated authority powers
“It is questionable whether the strata manager’s delegated authority on broker appointments extends to issuing a Letter of Appointment without genuine communication with the strata committee,” said Trowbridge. “Also, my understanding is that NIBA’s new Code of Practice requires brokers to have direct communication with the strata committee.”
Trowbridge said he is aware of brokers and strata managers whose fees and commissions “exceed competitive market rates, sometimes by large margins.”
“In many such cases, the strata committee and the owners are not aware of the details of these arrangements,” he said. “That is part of the reason why transparent disclosure needs to be pursued across the industry.”
SCA Best Practice Guide
ACIL’s allegations of widespread strata industry misconduct come nearly one year after Trowbridge’s report. In December, the Strata Community Association (SCA) released its own voluntary industry guide: Strata Insurance Disclosure Best Practice Guide. The guide, said Trowbridge, is closely aligned with his handbook.
“I’m not disappointed because I publicised something that I thought needed to be publicised,” said Kelly. “We published a report for everybody and the report has died.”
He said there’s not much more he can do.
“I’m hoping people will look at the review and make a decision about maybe changing some of the ways we’re going about doing our business,” said Kelly. “The participants in this market should reflect upon its comments and the legislation and review whether they’re happy with the way they are interacting with the strata that they represent and the insurer and the advisor.”
Are you an insurance broker working in the strata insurance market? Do you think self-regulation is working or can work to correct a lack of transparency around fees and commissions? Should the government step in and regulate the strata sector? Please tell us below
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