Strata strife as regulators ponder investigation
Strata strife as regulators ponder investigation | Insurance Business Australia
Insurance News
Strata strife as regulators ponder investigation
IB asks two stakeholders for their views
Insurance News
By
Daniel Wood
The Australian Competition and Consumer Commission (ACCC) is continuing to review the strata concerns brought to it by the Australian Consumer Insurance Lobby (ACIL).
“ACCC have advised us these initial inquiries can take some time,” said ACIL chair Tyrone Shandiman (pictured above) who received an update from the regulator this week.
He said he was confident both the ACCC and the Australian Securities and Investments Commission (ASIC) are taking his lobby group’s concerns seriously.
Last month, ACIL called on regulators to investigate what it described as a “systemic pattern” of misconduct by strata managers in how they appoint insurance brokers. The lobby group said it has reported 146 cases of alleged misconduct.
What does the SCA think of the allegations?
The Strata Community Association (SCA) is a significant stakeholder in the strata industry.
According to its website, the SCA “proudly fulfils the dual roles of a professional institute and consumer advocate.” The website says is has more than 3,300 members, “who help oversee, advise or manage a combined property portfolio with an estimated replacement value of over $1.2 trillion.”
The guide, says the SCA, “sets out necessary and critical changes to how SCA members disclose strata insurance practices.”
IB sent the SCA a range of questions, including whether this organisation was surprised by ACIL’s alleged revelations and if the SCA supported an investigation by regulators.
The response also referred to “three touch points” in the guide for strata insurance disclosure: “At the Annual General Meeting (AGM), at policy renewal and at the time of quotation.”
“Which we are confident that, along with the increased disclosure contained in the provisions, will standardise and formalise strata insurance communication with committees,” said the spokesperson.
When IB asked the SCA if it could respond more directly to the questions, the spokesperson sent a link to the guide and said many of these issues, including implementation, education rollout and the rationale behind the guide, were covered last year.
Does the SCA need “to reflect”?
IB asked ACIL for a view on the SCA response.
“Considering SCA’s desire for self-regulation and the concerns we have highlighted, it becomes imperative for its board and management to reflect on what measures they have implemented to uphold professionalism and eradicate unethical practices in light of the damning evidence of illegal activities presented,” said Shandiman, who is also managing director of the brokerage, Strata Insurance Solutions.
He said there were “notable deficiencies” in the SCA’s best practice guide.
“Particularly regarding the process of informed consent for appointing new parties to an insurance policy,” said Shandiman, “our research has uncovered that these requirements fall short in practice.”
He referred to the SCA’s “three touch points” that recommend the times when disclosures should be made.
“We provided ASIC with 146 examples demonstrating instances where strata managers have appointed a new broker to a policy outside of these specified times,” said Shandiman.
He said the guide does not explicitly mandate that strata managers shouldn’t be doing this.
“The absence of such a requirement leaves room for potential misuse, undermining the principle of informed consent,” said Shandiman. “Strata managers changing insurance brokers without securing explicit approval from the owners corporation can lead to conflicts of interest and a lack of transparency, ultimately eroding consumer trust.
Six months of meetings
He said during six months of discussions with the SCA, the two organisations disagreed over important areas concerning strata insurance transparency and disclosure.
He concluded that the “opaque” brokers fee system should be phased out in the interests of transparency.
Are you a stakeholder in the strata insurance sector? 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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