Insurance providers busted – Who will really find you the better deal?
In Australia is it compulsory to obtain strata insurance for your strata property. This type of insurance will cover the common or shared property which is under management of the strata title. In the ever-changing legal and property environment, it is important to source the most comprehensive and value for money policy keeping in mind you are seeking to protect both the individual lot owners risk as well as the commercial and legal entity that is your body corporate. But is it best to source strata insurance directly yourself, use the property management agent, or use a broker? We bust the myths here.

Strata Insurance basics

Strata insurance provides insurance for lot owners, for example the building and Public Liability risk attached to it, as well as the legal entity the lot owners belong to, that being the strata company. It is often overlooked that a strata titled property and the council of owners form a legal entity that has exposure to commercial risks that a regular home owner does not.
In the main, the strata insurance policy is insuring such risk as:
• The building
• The common areas of the property such lifts, pools and car parks
• As well as loss of rent and/or temporary accommodation costs
• Public liability and a number of other elective options
It is the elective nature of a strata insurance policy that can lead to exposure for its policy holders. There is no ‘standard’ policy and each strata policy can be designed for those advising on the establishment or managing the policy, to be as comprehensive or as minimalistic in terms of what cover is provided.
It is important to note that the policy your strata has in place is only as adequate as the advice you receive when designing and negotiating the policy with your strata insurer. A strata policy is made up of multiple sections and each policy section is optional and NOT included as standard by the insurer.

Using an agent to obtain Strata Insurance

As a property owner you may appoint a strata management agent to manage the financial, insurance and administrative side of your strata property scheme. An agent can be very helpful with arranging the day-to-day management of the property. However caution should be used when an agent is provided with authority to arrange the strata company insurance. Typically property managers are acting as agents of only one insurer and paid commission by that insurer to place all strata policies with them.
This strata insurance policy may not necessarily be the most suitable for your property nor the most competitive premium-wise. The strata agent on average will receive from 15-20% commission from the insurance premium when placed through their agency. The government requires that agents be transparent in how much commission they are receiving from the insurers. However there is still debate on the subject as the owners best interest is not placed first, but rather in the interest of the insurer and the agent striking a partnership. There are many more policies out there to compare rather than just the one through the agent.

Using a direct insurer to obtain Strata Insurance

Taking things into your own hands and dealing directly with an insurer provides you with control, however also provides you access to a very limited market and you will only receive general advice from that insurer about the product along the way. You may approach the few insurers who offer strata insurance direct, however this can be a rather time consuming process with limits to what information you will be able to obtain.
The general insurer may not be aware of specifics about your property and is not licensed to provide anything other than general advice about their own insurance product.

Using a broker to obtain Strata Insurance

Insurance brokers also receive a commission, however brokers have access to the entire insurance market. This means access to multiple insurers and multiple insurance options for the strata owner providing the most comprehensive, detailed, and value for money options on the market. Due to the scale and size of the broker market, the deals a broker receives can be more competitive than if you approached the insurer yourself.
A broker is also licensed to provide advice regarding each policy and the variations between policies and insurers on the market. It is a broker’s professional duty to adequately inform and assist your strata company to avoid the pitfalls of an uninsured loss. A strata manager is not licensed to provide this expert advice.
Dealing with an insurer direct also means that the product selection is limited and you will have to rely on your own knowledge of insurance products to make the right choice on behalf of the strata, leading to exposure for claims by the unit owners if you as the strata council do not undertake this correctly. This can prove difficult for a layman with the ever changing insurance market.
The benefits of using a broker become very real and measurable come claim time. A broker is able to negotiate the best deal for your strata property rather than one with a bias partnership or limited product knowledge. They will also know the best advice to give regarding the marketing and products available to your specific type of property and property features. Brokers can also negotiate directly with insurers to get better deals for the pending insurance program. A strata agent is restricted by whatever terms the insurance partner has forced upon them.
Leaving the options in the capable hands of a broker is the best choice you can make for your strata property insurance program. Get in touch with Challenge Insurance Services today to find out how we can help you save on strata property insurance.