Strata Insurance under scrutiny: time to close the transparency gap

The focus on transparency in strata insurance in Australia and New Zealand has been increasing, but more needs to be done to improve the outcome for property owners.

There have long been concerns in this area. A big one is that strata managers often receive commissions from insurance brokers that lead to conflicts of interest and potentially higher costs for owners.

This is because the commission structure may incentivise the managers to recommend policies that generate higher commissions even if a cheaper, equally suitable policy is available.

According to CHOICE, the exact amount of commission between brokers and strata plans is often unclear, a situation made worse because many strata schemes are largely disengaged and clueless about what's happening. 

A media investigation last year alleged that customers were being misled by not receiving more affordable insurance options and that some strata managers were getting kick-backs from brokers without the knowledge of apartment owners.

Similarly, a NSW Fair Trading review found that a NSW strata manager failed to disclose commissions and obtain multiple quotes for strata plans. It also charged a premium to strata plans that did not use its wholly owned insurance broker.

Role of the Trowbridge review

In 2022, industry consultant John Trowbridge AO was commissioned to conduct a review of strata insurance to examine these concerns as well as the affordability and availability of strata insurance.

Trowbridge recommended that brokers' practice of passing some or all of the commissions paid to them by insurers to strata managers be phased out to avoid conflicts of interest.

He suggested using standard templates for financial disclosures, ensuring timely transmission of quotations and invoices, and providing full explanations of commercial relationships between strata managers and brokers.

He also highlighted the need for a minimum set of eight financial items to be disclosed as part of the strata insurance process. This includes the base premium, commission (if any), stamp duty, GST, and other relevant fees.

In addition, Trowbridge called on the Strata Community Association (SCA) and the National Insurance Brokers Association (NIBA) to establish guidance notes or practice standards for their members to enable them to operate on a self-regulatory basis.

And, in 2023, Trowbridge released a Strata Insurance Disclosure Handbook which included standard templates and disclosure procedures.

A mixed bag of reactions

Since the Trowbridge review, there have been some regulatory changes relating to strata insurance.

One which comes into effect in July 2025 requires insurance brokers to receive informed consent from clients before receiving commissions under the Corporations Act 2001. 

Another is the expansion of disclosure requirements for strata managers in NSW that began in February 2025.

It aims to improve existing disclosure of commissions on strata insurance and the owners’ corporation’s awareness of such costs.

In NSW, amendments to the Strata Schemes Management Act 2015 have also introduced significant transparency and accountability measures for strata managers, especially for insurance.

These reforms, which came into effect on February 3, 2025, mandate detailed breakdowns of insurance quotes, commissions and broker fees.

In December 2023, SCA released its Strata Insurance Disclosure Best Practice Guide in response to Trowbridge’s review, outlining changes to how SCA members disclose insurance practices.

SCA president Joshua Baldwin says this guide, introduced in July 2024, is mandatory for all SCA members.

“Its disclosure practices set a higher threshold than the legislated minimum requirements for disclosure in all Australian jurisdictions, except NSW which introduced legislation in line with this best practice,” he says.

Karen Stiles, policy director at the Owners Corporation Network of Australia (OCN), notes that some strata managers actively oppose the removal of commissions from agents, saying it will destroy the industry. “Others have moved, or are moving, to a no-commission management fee base.”

On the broker side, NIBA released additional guidance materials for subscribers to the Insurance Brokers Code of Practice in September last year, focused on strata insurance.

But this year, NIBA defended insurance commissions paid to strata managing agents in its submission to the ACT Inquiry into the Management of Strata Properties. 

NIBA's position, supported by the Insurance Council of Australia (ICA), acknowledges the practice of strata managers receiving commissions, often as a standard model in the industry, and highlights the importance of disclosure and transparency rather than banning them.

However, Stiles says individual brokers have supported the move away from strata managers receiving commissions.

The ICA has pushed for full transparency and disclosure on strata commissions and fees as one of 17 recommendations made in a policy paper released in November last year to help improve strata insurance outcomes.

Australia’s largest strata underwriting agency, CHU, also supports the move towards more transparency.

CHU CEO Kimberley Jonsson says the regulatory changes are formalising what is already standard practice for CHU. 

Indeed, CHU itemises commissions in quotes and actively encourages this to be shared by brokers and strata managers with strata owners.

Advocacy groups raise their voices

Stiles says OCN, the Australian Consumers Insurance Lobby (ACIL) and other consumer groups have called on the Treasurer to direct the Australian Competition and Consumer Commission (ACCC) to investigate the strata insurance landscape.

No action has been taken to date, but the report highlighting hidden fees and kickbacks in strata insurance prompted ACCC chair Gina Cass-Gottlieb to call for all strata insurance commissions to be banned.

Stiles adds that separately, ACIL has referred examples of owner harm to the ACCC and the Australian Securities and Investments Commission.

Meanwhile, ACIL has joined OCN in calling on the NSW government to prohibit conflicted payments to strata managing agents, following a 2024 stakeholder roundtable to discuss removing commissions. 

“We are also keen to see the end of opaque business structures such as the joint ventures and wholly owned companies set up to avoid declaring ‘commissions’,” says Stiles. 

Baldwin says SCA would like to see an industry-wide adoption of disclosure templates and practice standards that are in line with SCA’s Best Practice Disclosure in each Australian jurisdiction.

He says: “The system needs to work for everyone involved – for the owners paying the premiums and the professionals doing the work.

"That means fair structures, clear information and honest conversations about value. Reform is not just about improving practices; it’s about building something better that people can understand and trust.”

More to be done in New Zealand

In New Zealand, there is much better transparency in strata insurance than now that disclosure of commissions by body corporate managers is required, says Joanna Pidgeon, a property law specialist and director of boutique law firm Pidgeon Judd.

She says the passage of the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022 (UTA) introduced legislated disclosure of conflicts of interest for body corporate committee members.

Body corporate managers must now comply with a code of conduct and could face pecuniary penalties for breaches.

Plus, the CEO of the Ministry of Business, Innovation and Employment has the power to investigate violations and to intervene in cases of mismanagement and breaches.

Pidgeon says some body corporate managers previously did not disclose commissions or if they did, they might not have disclosed the quantum. Now both of these should be disclosed. 

However, Pidgeon, chair of the Unit Titles Working Group which was instrumental in drafting the UTA, believes there’s work still to be done on this legislation.

She says the UTA is unclear in its wording and could be improved as s135 requires a body corporate to insure a building to its full insurable value, but indemnity cover is allowed if full replacement cover is not available.

“Sometimes full insurance might be available but the pricing may be uneconomic and so owners opt for indemnity value insurance. If this a technical breach, or if the price is so high, is it effectively unavailable,” she says.

While the grasp of commissions has improved, Pidgeon says there is probably little understanding of the makeup of these other components of insurance. 

“Often only one quote will be obtained for insurance (although some buildings may be lucky to get a quote),” she says. 

“A requirement to try to obtain multiple insurance quotes and full transparency of fees and commissions would be helpful and granular disclosure of insurance premiums, duties, taxes, remuneration to brokers and body corporate managers, and other fees would be desirable.”

Pidgeon notes that New Zealand’s Treasury department conducted a survey on these insurance issues, but there seems to be little appetite to address them further presently.

She adds: “In some places where insurance is so hard to find and costly, there are fewer insurers providing cover. There may be a question for a greater government role to ensure availability of insurance.”

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