NSW to reform Strata Insurance Laws

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May 10, 2013
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NSW to reform Strata Insurance Laws

The NSW Government will crack down on insurance commissions to strata agents by introducing legislation on disclosure and sanctions for breaches.

Fair Trading Minister Anthony Roberts says reform of outdated strata laws will go before Parliament early next year.

“Concerns have been expressed at the receipt of third-party commissions by strata managing agents,” a position paper says.

Commissions paid by insurers are the most common form of third-party payment.

“Some argue such commissions represent a conflict of interest for the agent in their management role that can lead to mistrust between agents and owners.”

Insurers that pay commissions are likely to pass on the costs to owners’ corporations through higher prices, the paper says. This may provide an incentive to put strata managers’ interests ahead of owners’ corporations.

The new laws will require managing agents to disclose at each AGM the size of and services rendered for any commissions over the previous year and for the year ahead.

Owners’ corporations will decide whether their managing agents are allowed to receive commissions, and in what circumstances.

Strata agents will be banned from receiving non-monetary benefits and gifts, and they will have to obtain at least three quotes for insurance, to ensure competition and choice for owners.

“This regime will ensure there is transparency, accountability, choice and competition in this area of the strata marketplace,” the paper says.

“Appropriate sanctions will apply for misleading disclosures.”

As reported by insuranceNEWS.com.au last week, the NSW Government backed off banning commissions after opposition from insurers and groups such as Strata Community Australia.

Strata insurer CHU says it is pleased the Government understands the concerns around banning commissions, which could increase costs to owners’ corporations, especially for smaller properties.

“We look forward to working with the industry and government on the practical application of the proposed reforms,” a spokesman said.

Mr Roberts says the reforms will offer more protection for homeowners and minimise disputes in the state’s 72,000 strata schemes, which have $350 billion in assets.

Within 20 years, half the state’s population will live or work in a strata or community scheme.

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