Strata insurance: testing the broader market
14 June 2016

This article about strata insurance quotes has been supplied by Wayne Stevens President of Unit Owners Association of Queensland (UOAQ).

First, a nice, feel-good story… one where the owners finally backed a winner.

A recent Adjudication contains an interesting backstory about the benefits of outsourcing strata insurance to an independent broker… see WAVES [2016] QBCCMCmr 132i.

It is true, they’d messed up their 2015 Statutory Insurance Motion by not including it at all, thereby earning themselves an EGM compliments of the Adjudicator. But at least they’d set themselves on the path to significant annual savings off their insurance premiums.

Dating from their registration about 10 years ago, WAVES’ strata insurance was normally handled by their Body Corporate Manager (BCM).

Also, the one insurer had been able to supply the most competitive quote for every one of those years.

There is nothing unusual about any of this: it is a very common (and lucrative) practice for BCMs to provide this service.

they take a commission, generally up to 20% of the base premium

They are tasked to find the most competitive quote each year and in return they take a commission, generally up to 20% of the base premium.

same insurer being able to provide the most competitive quote

And, even the same insurer being able to provide the most competitive quote year after year…this is also quite familiar phenomena.

For the 2015 AGM however, the WAVES’ Committee decided to break the mould and go directly to an independent broker. This broker was known by the Treasurer, an accountant, to provide a very professional service.

It is standard practice for independent brokers to approach a wide range of insurers for quotes. Brokers understand the market is constantly changing: so they know they have to constantly test the broader market if they want to get the best on offer at the time.

Unfortunately, this is not necessarily a standard practice with some BCMs. Some tend to favour just two or three insurers (including the insurer they are associated with as an Authorised Representative), and often simply approach these same few insurers, from one year to the next.

It is also understood that some strata insurers will deal only with brokers…and not with BCMs. This means the insurers’ market is normally broader, and more competitive, than the one trawled by BCMs.

The WAVES’ broker approached eight insurers, including the incumbent insurer.

The broker reported back to the Committee with a range of responses from these insurers, including a recommended option.

The incumbent insurer was not so competitive this time: their quote was about 20% higher than the recommended, and lowest quote.

The three best quotes were properly included, as Alternatives, in the 2015 AGM Insurance Motioniii; the Committee supported the broker’s recommendation; the owners voted accordingly.

The 2014 premium was $34,031; the 2015 premium was $27,301; everyone was happy.

Ok, this is nice for them…but what about us?

It is true that ‘One swallow does not a summer make’. The WAVES’ experience does not, in itself, prove a pattern.

But, WAVES is not Robinson Crusoe.

It is our experience that when Bodies Corporate are persuaded to deal directly with independent brokers, they are generally rewarded with significant savings.

For some time now, we have been recommending Bodies Corporate look seriously at using independent insurance brokers, preferably those who specialise in strata insurance.

One particular broker we have been recommending is Strata Insurance Solutions (SIS)iv. As their name suggests, strata insurance is their business.

Many Bodies Corporate have followed our recommendation: we in turn have followed these Bodies Corporate, to ensure our recommendation is justified.

an average savings of around 18%

The pattern to date confirms an average savings of around 18%.

Ok, 18% sounds nice… but 18% of what?

The reality in strata insurance is that the ‘what’ is a lot of money. You only have to look at any complex’s annual budget to see that their strata insurance premium is one of the biggies.

Every complex is different of course, ranging from the very small to the very large… and the size of the overall premium for the complex varies accordingly. But regardless of the size of the complex, strata insurance normally involves a whole lot of $$$s per owner.

Strata insurance is also annual. On-going savings like 18% each year, year after year, can quickly add up to a significant amount.

This means real potential for keeping the levies down; and this, in turn, helps keep the value of the units up. Nothing can cruel the value of your unit more, than high levies.

Do yourself a favour
Take your strata insurance to an independent broker: find out how much you can save.

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