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Insurance Business | 27 Nov 2013, 07:38 AM Agree 0
An insurance CEO has defended his company’s decision to pay commissions to strata managers, arguing that there is no conflict of interest.
  • David Summers | 27 Nov 2013, 09:48 AM Agree 0
    Strata managers are holding the Strata Plans to ransom, The are now blackmailing the strata plans into staying by threatening to charge more if they don't look after the insurances?

    Does CHU offer flood? CHU has a very restrictive cover for retaining walls.. If better cover is elsewhere then the strata plans need to know about it.

    I’m sorry but CHU and SUU have market share to lose should commissions be removed. It will open the whole market up and that is why CHU and SUU want to continue paying commissions. They are scared to lose their market share. You cannot Fluff over the real reason.
  • David Ferris | 27 Nov 2013, 10:06 AM Agree 0
    Apart from the issue of Commissions, I believe the real conflict arises from an understanding of WHO each party actually represents.
    A strata manager receiving a Commission from an insurer is in the capacity of a 'representative of the insurer' vs a Broker who represents the client.
    How can this NOT be a conflict?
  • Trevor upham | 27 Nov 2013, 10:16 AM Agree 0
    Well said David - how it can it not be a conflict when they are acting as agents of the insurer?
    They already get paid fees to manage which includes insurance. A major problem is that unit owners do not push the aspect of insurance hard enough.
  • John Hallman | 27 Nov 2013, 10:18 AM Agree 0
    I have an investment unit in a large strata block in Manly Vale. I provided a more competitive quote than CHU to the strata committee, with superior cover. The strata manager simpy said move your cover and my management fees go up by $ 15,000 the amount of the commission he is receiving. If this is not blackmail prey tell what is. Take your off it David !!!
  • Mark Patterson | 27 Nov 2013, 10:18 AM Agree 0
    I am a broker and an owner of a residential strata property and was under the impression the strata manager always represented my best interests.
    It's is clearly not the case when they are acting as an agent or authorised representative of an insurer.
    I'm happy for them to receive commission as long as they are legally responsible for the advice they give and the coverage they obtain.
    Comments from insurers such as CHU (QBE) clearly need to be taken in the context of their position representing shareholders, not the client as brokers must.
  • Paul Burstow | 27 Nov 2013, 10:30 AM Agree 0
    I have been a broker for over 20 years and agree with David Ferns comment. Like most brokers I gave up competing with some Strata Management companies a long time ago. I had the best terms /cover and claims service representing the client not the insurer. I was beaten by strata management companies threatening to increase their maintenance fees to body corporate 's because it was a 'total package they were offering". This cartel should have been stopped by Governments and NIBA a long time ago.
  • David | 27 Nov 2013, 10:31 AM Agree 0
    I've operated on a fee basis for some years with property owner (including Strata) & have a few Strata clients that have made the switch from the Strata Manager to myself. Those Strata managers are aware of the commission saving (as it's detailed on the invoices that I send via them) but they haven't referred any other business to me. Perhaps their insurance department provides an equal or better service than my practice would but it seems like there may be a conflict of interest there somewhere (not my area of expertise but I assume that could also be the foundation for a class action). At least the proposed changes should go some way to help dispel the misconception held by many BC's that the insurance needs to be handled by the Strata Manager.
  • Trevor upham | 27 Nov 2013, 10:44 AM Agree 0
    There are plenty of Strata Property Managers out there and I'm sure if they would be prepared to negotiate the fees they charge - if you property manager is not doing the right thing and/or not earning the fee they are paid, it's simple to look for a new manager.
  • Robert Cooper | 27 Nov 2013, 03:37 PM Agree 0
    There is definitely a conflict of interest if the Strata Manager acts for the Body Corporate for certain duties and then CHU for Insurance coverage. I cannot see Mr Hampton's point at all.
    I would love to know what training CHU give all their ARs and how they respond should a Strata Manager give wrong advice relating to insurance to the Body Corporate. Which hat? Who are they acting for when they give incorrect advice? Will it end up favouring the insurer or favour the Body Corporate? How will the Strata Manager's own PI cover respond to this? Or are all Insurance matters excluded?
    CHU, we cannot accept your argument.
  • Dan The Man | 28 Nov 2013, 09:41 AM Agree 0
    I had a client ring for some mutual advice as they had water damage to the roof of a garage and when they rang their BC Managers, they were advised that the garage and roof damage does not form part of the building and as such a claim could not be submitted.

    When I advised the client that I thought that coment was a load of garbage and to go directly to the broker (Yes, they pay commissions and are prominent in the body corporate market) they were told of course the claim could be submitted and the process began.

    I put this down to two things:

    1. BC Manager has no idea of what is covered and what is not and also has no problem in giving advice on somethign that he is not licensed to comment on

    2. BC Manager is protective of potential claims against the policy which could affect income they earn should the policy be moved elswhere or new insurer engaged.

    PS - I also had a scenario pop up where a premium was beaten but due to the BC Manager advising that if the insurance was moved then his fee would have to go up by the amount of insurance commission he was losing.

    All in all, why don't:

    1. We all leave insurance to the insurance professionals.

    2. Body Corporate Managers charge to manage the body corporate and that is it!

    If we all stop trying to cross sectors I think consumers will be much better off!

    Why don't we start by:

    1. Making sure that BC Managers only charge for managing Body Corps

    2. Coles only sells grocercies or products associated with its core business

    3. Australia Post send & receive mail and only provide services within their sector

    4. Make sure that banks deal with banking

    If not, I think I should start a brokerage that:

    1. Manages Body Corps

    2. Sells bread and milk

    3. Alows you to send mail & parcels on beahlf of third parties as well as pay household bills

    4. Offers loans and banking facilities

    If we don't control this soon, I will be going to the TAB to buy a loaf of bread and milk, send my mail & pay my bills, get my body corporate management finalised, get a home loan, get an insurance quote on my home, contents & motor vehicle and throw ten bucks at R5 No. 2 which is the only thing I should really be doing.

    This is getting out of control!

    Regards,

    Angry Insurance professional
  • Frank | 28 Nov 2013, 11:04 AM Agree 0
    Very good points raised above. Unfortunately, the Insurance industry has alot to answer for...

    In the strata space alone, the strata manager is affiliated with the broker who is affiliated with the u/w agency. Clearly, all parties are compromised.

    But how is that different to a broker establishing a scheme/facility or being affiliated with an u/w agency?

    Yes, the conflicts may be declared on page 3, line 26 in ariel font size 8 on a document (i.e. FSG) but it's never read by the ultimate beneficiary of the policy - the Insured.

    QBE, have you not learnt anything from the the forced-placed insurance scandal in the US? Even though a person/entity may not be complicit in conduct, they are accountable for their implicit conduct.
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