Forum

Insurance Business forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Notify me of new replies via email
Insurance Business | 26 Nov 2013, 07:44 AM Agree 0
Reforms to tackle the conflicts of interests over strata managers receiving commissions from insurers have been heavily criticised.
  • Mark | 26 Nov 2013, 09:17 AM Agree 0
    Aren't there only 2 Strata Insurers (CHU and SUU) that deal with Strata Managers? I thought the remaining players only dealt with Brokers.
    I wonder how many brokers will be used as a quoting system so the Strata Manager can satisfy the '3 quotes' requirement each year?
  • Mike Sullivan | 26 Nov 2013, 09:37 AM Agree 0
    Clearly agents clip the ticket on the way through without providing correct product advice, I dare say in the majority of cases the terms are rolled over unless the Body Corporate insist on options.

    AGENTS MUST BE REQUIRED TO HOLD APPROPRIATE QUALIFICATIONS, any advice given should be in writing. The most appropraite outcome for consumers is if agents are not qualified in accordance with FSA they are not permitted to act on behalf of the Body Corproate and receive any commissions from insurers.

  • Frank | 26 Nov 2013, 09:42 AM Agree 0
    Interesting to note that there are some broking firms which have vertically integrated the strata & body corporate market. The same individuals/shareholders have an interest in:
    - the property management firm;
    - the insurance broking firm; &
    - the u/w agency firm which writes the insurances for those properties.

    But those same brokers don't think there's anything wrong with that because their conflict of interest is declared on page 3, line 26 in ariel font since 8 on a document (i.e. FSG) which is never read by the policy beneficiary.
  • Errol Anderson | 26 Nov 2013, 09:54 AM Agree 0
    I agree, this proposed legislation does not go far enough.

    The whole area of strata manager commissions needs to be placed under close scrutiny, not just insurance commissions.

    The fact that a manager receives a commission is not the real issue, it is the process that leads to a manager receiving a commission from a limited selection of “preferred suppliers”.

    We know an owner, or the committee, may bring alternate independent quotes to the manager prior to any quotes being voted on.

    However, the current process sees the manager in a position of privilege and with higher-knowledge prior to quotes being placed on a meeting agenda.

    This is where the current process fails the strata industry.

    This allows the manager to ensure their preferred supplier quote comes in under independent quotes. Some say “that’s great, it lowers the price” and this may be correct in the first year.

    The second year will see other brokers unwilling to waste their time and resources to quote, and by the third year of preferred supplier quote acceptance there may only be one quote as other businesses drop away.

    The fourth year, up goes the premium, competition is gone.

    The QBCA viewpoint is that the current process allows anti-competitive behaviour, insider-trading behaviour and conflicts of interest.

    Proposed Solution:
    QBCA have proposed 2 options-

    1 Allow other types of product that provides competition through assurance and assurance, such as mutual assurance schemes covered by a blanket insurance cover.

    2 An independent escrow system be created for all quotes where a manager’s preferred supplier commission is included. Who pays for this? The system can be electronic and paid for by those using the service.

    This process will be arms-length, accountable, transparent.

    www.qbca.org
  • George | 26 Nov 2013, 10:05 AM Agree 0
    i agree with Frank, try to quote against a particular broker if their sister company is the property manager
  • Ian J | 26 Nov 2013, 10:09 AM Agree 0
    Over the years there have been numerous situations I have come across where the strata manager has it all wrong. Not all, but many have absolutley no clue about insurance and they have no real interest or understanding of how insurance should be administered or claims managed and risks properly assessed to manage loss. Get them out of it all together.
    CHU are the main problem in so far as there obvious commitment to the strata managers over the broking sector. They reserve quotes for SM's and not brokers and even disregard correct underwriting information presented by a broker over a SM and favour SM's completely. Maybe QBE should have something to say about this and remember where most of their premium income comes from.
  • Scott | 26 Nov 2013, 11:17 AM Agree 0
    I am not sure the 3-quote system will help terribly.

    The 'bad apple' strata managers will know which insurer to choose to make sure the body corporate pick the right insurer (eg: doing a Zurich quote on a strata under $1m is always double the price of SUU/CHU/Longitude/QUS), it will give insurers more work with little reward so genuine quotes will have a larger turn around time, & it will put extra work on the strata managers, which just means bigger fees.
  • Robert Cooper | 26 Nov 2013, 11:43 AM Agree 0
    Strata Managers who are seeking terms on behalf of their clients and consequently earn a commission should declare their earnings to to shareholders, should be registered as an AR with a licencee, hold at least Tier 2 and provide an FSG and SOA on their recommendations on a minimum of three choices of insurer including not just price difference but main policy differences. This is the case for us Brokers, it should be the case for them too.
  • Mr Curious | 26 Nov 2013, 11:48 AM Agree 0
    If the Strata Managers are being paid commission by the insurers and do not have an AFSL then on what basis do they earn the commission? Is it a placement fee earned for using a particular insurer but having no responsibility for the perceived advice given for using the selected insurer?
  • Brisbane Broker | 26 Nov 2013, 12:55 PM Agree 0
    Well said Frank!
  • Andrew | 27 Nov 2013, 01:21 AM Agree 0
    And brokers don't get commissions??
  • Mr Curious | 27 Nov 2013, 10:27 AM Agree 0
    Andrew of course brokers get commissions but they also have a duty of care to the client to explain the cover and obtain appropriate cover to protect the client. If they don't they are open to being sued for professional negligence - my point is this does not apply to a strata manager. They have no requirement to compare the covers offered by different insurers and yet they still get paid - what are they being paid for? Making a phone call to CHU? They already charge for managing the property is this commission from insurance just the cream on the pie for no risk or advice just facilitating the placement of the insurance.
  • Mike Sullivan | 27 Nov 2013, 12:52 PM Agree 0
    I agree in most cases the S.M. only sees the service as another stream of income, much like car dealers.

    The distribution channel needs to be cleaned up, for the good of the consumer.

  • Mr Curious | 15 Jan 2014, 09:57 AM Agree 0
    There is of course the Secret Commissions Act 1905 which could impact on Strata Managers and/or insurers if they were complicit in the supply of the secret commission.
  • Mike Sullivan | 15 Jan 2014, 10:27 AM Agree 0
    The revised act should ban commissions unless cover is arranged by a FSA liceneced intermediary.

    Car dealers have lost CTP commission and survived

Post a reply