How Strata Insurance Commissions Are Driving Up Owners Corporation Fees

If you have ever wondered why your strata manager doesn’t seem to be acting in your best interests, it could have something to do with how your building’s insurance works. Most strata management companies receive a base 20% commission on the insurance policy used on the building. This practice means the strata manager is incentivised to seek out the most expensive insurance policy for their client to maximise their income, rather than obtain the best value for their client. This commission can be as large as 40% and these commissions are ultimately passed back onto the consumer in larger insurance premiums. Insurance is the largest expenditure item for most apartment buildings, being up to 80% of the expenditure for smaller buildings. Insurance premiums are also set to rise further because of more frequent floods and natural disasters. How did insurance commissions become so common? The standard strata contract of appointment used on properties was designed by a national industry group called the Strata Community Association (SCA). These contracts include the standard 20% base insurance clause but also deter owners from seeking out cheaper insurance by charging them fees for not using their own brokers. These contracts normalise the insurance commission structure in the strata management industry and are now a common practice that are difficult for consumers to avoid.

What does Strata Savers do?

At Strata Savers, we want to help owners avoid paying excessive strata fees and insurance commissions.  We review Owners Corporation financials to identify and substantiate savings.

We can assist owners in terminating their Owners Corporation manager and appointing strata managers who don’t use insurance commissions in their standard contract.