More than 160,000 Australian strata communities paid over $1 billion in strata insurance costs in 2020, highlighting the spiralling costs of the insurance product across the country, according to a new report.
The report, commissioned by Strata Community Association (SCA), was carried out by Deakin University and lead author Dr Nicole Johnston. It surveyed 454 strata managers and 280 strata lot owners, analysed 58 versions of state and territory strata management agreements, investigated 38 pieces of legislation and regulation, and gathered complex data from insurers.
The report found that 165,554 Australian strata communities paid more than $1 billion in strata insurance costs in 2020. During the same year, strata communities paid nearly $230 million in duties, levies, and taxes.
In addition, 27.45% of premiums were paid to the state, territory, and federal governments. Therefore, for every $100 of premium, around one-third is reinsurance costs, one-third is administration, and one-third is claims payment.
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The industry-first report also emphasised how to address strata insurance affordability and availability issues and fix the value of strata managers navigating the complexity of the insurance process and their role in carrying out insurance services for strata communities (also known as owner corporations, bodies corporate, or strata companies).
“The report shows us three things in particular, and that is just how much work strata managers do and how valuable they are in the process, how much insurance costs have risen over the past five years and the affordability and availability issues that exist, and a comprehensive overview of strata insurance service models,” said SCA National President Andrew Chambers.
“Strata managers sit in the middle of a complex web, providing value to strata communities, brokers, insurers, underwriters, and suppliers through their localised knowledge of the specific strata community, the relevant legislation and regulation, and their duty to act in the strata community's best interests.”
The SCA put forward recommendations to address strata insurance issues, including reducing or abolishing stamp duties on strata insurance premiums, analysing “stacking taxation” or “taxes on taxes” (e.g., with GST), and replacing emergency levies with general revenue.
“Funding for mitigation as well as an effectively introduced reinsurance pool in northern Australia and better building regulations are among the measures that will help drive down premiums and drive up consumer protections,” Chambers added.
“We want to work with [the] government and regulators, as well as the whole insurance supply chain to improve consumer knowledge of the current legislation and systems and improve understanding, transparency, and disclosure arrangements across the strata insurance industry.”
