The New South Wales government has introduced groundbreaking legislation that imposes the strictest obligations on strata managers in Australia regarding the disclosure of insurance commissions. This legislative move follows a series of public concerns, including those raised by ABC’s 7:30 Report and ACIL, which earlier this year referred 146 instances of misconduct to regulatory authorities.
Key Provisions of the Proposed New Legislation:
Prohibition of Unapproved Benefits: Strata managers will be prohibited from receiving benefits related to insurance contracts other than commissions or training services included in their agency agreements, approved by the owners corporation, or fall under a $60 gift limit. This addresses ACIL’s concerns about unclear remuneration practices, including advanced commissions and profit-sharing arrangements.
Restrictions on Commission Claims: Strata managers will be restricted from claiming commissions for insurance policies when the owners corporation has independently obtained quotes and arranged the insurance. ACIL previously raised concerns about industry contract provisions that penalise owners corporations for not using the strata manager's preferred insurance provider.
Conflict of Interest Disclosure: Strata managers will be required to declare that accepting benefits from an insurance policy does not contravene the Property and Stock Agents Regulation 2022, which mandates that they must not put their interests in conflict of their clients'. ACIL has consistently voiced concerns about strata managers failing to meet their fiduciary duties.
Enhanced Transparency on Conflicts of Interest: The proposed legislation mandates greater disclosure to committees regarding any conflicts of interest. ACIL has highlighted the need for strata managers to obtain informed consent from their clients.
Detailed Premium Breakdown: Insurance quotes will be required to include a full breakdown of the premium, aligning with the recommendations made by John Trowbridge on disclosure obligations.
Timely Provision of Insurance Quotes: The legislation requires that insurance quotes be provided to owners corporations as soon as practicable, allowing sufficient time for decision-making. ACIL has previously reported numerous cases where strata managers provided quotes too close to the policy expiry date, leaving owners corporations with insufficient time to respond.
Increased Penalties: Strata managers who fail to comply with the new provisions will face heightened penalties under the Act.
ACIL’s Response
“It is encouraging to see the government take decisive action on this critical issue, particularly in response to ACIL’s sustained advocacy. ACIL consulted closely with NSW Fair Trading during the drafting process, and we are pleased to see that several of our key concerns have been incorporated into the draft legislation. The proposed legislation will compel many strata managers to reassess and change how they conduct their business, which is a significant win for consumers and for ACIL, who have been actively lobbying for these reforms. However, we recognise that there will always be those who fail to comply with their obligations or seek to exploit loopholes. It is imperative that the Strata Community Association, as the professional body, ensures its members uphold and adhere to the highest professional standards.” said Tyrone Shandiman, Chairperson of ACIL.
“We have also been working closely with the Strata & Property Services Commissioner on an investigation of a strata manager that is now under further investigation. The diligence with which regulators have pursued these matters is commendable,” Shandiman said.
Looking forward, ACIL will shift its focus to other state jurisdictions. Discussions are also underway with the National Insurance Brokers Association regarding concerns about misconduct among insurance brokers. ACIL emphasises that while this new legislation imposes strict conditions on strata managers, many of the problematic actions identified by ACIL could not have occurred without the complicity of insurance brokers who failed to act ethically or in the best interests of their clients.
