Trowbridge Strata Insurance Review Phase 3 – “a blueprint for affordability, availability and competition”

Brick apartment building
Brick apartment building

John Trowbridge has just released the third phase of his independent review into strata or body corporate insurance practices. The synopsis found here and released on Trowbridge’s website, places priority on implementing a disclosure regime, the focus of Trowbridge’s Phase 1 paper, and working with all relevant parties to alleviate the current and ongoing market capacity problem.

From Trowbridge’s May 17th media release:

Phase 3 paper follows Phase 1 in July 2022, which offered findings and recommendations on transparent disclosure of intermediary remuneration (fees and commissions) and Phase 2 in December on potential remuneration reforms.

Commenting on the findings of the Phase 3 paper, John Trowbridge said:

“The paper identifies two priorities to be attended to without delay by industry initiatives. The first is an implementation of the Phase 1 disclosure regime. The Strata Community Association has announced that it is actively pursuing these recommendations with its members and the broking community. That is a valuable initiative for the strata industry and will be enhanced by the 2022 Insurance Brokers Code of Practice which has introduced new disclosure measures for insurance brokers to address the issue of transparency.

“The second concerns insurance market capacity, which is constrained. The insurance industry, comprising insurers and underwriting agencies, is being urged to investigate, in collaboration with representatives of broking houses, strata management groups and owners’ corporations, what steps can be taken to alleviate the market capacity problem“.

The paper also draws attention to owners’ collective responsibilities for building maintenance and repairs, remediation of defects and other matters affecting insurance risk including the management performance and insurance effectiveness of the owners’ corporation and its strata committee.

Other topics addressed include the potential for greater transactional efficiencies and the potential benefits of strata insurance data collections.

Specific affordability topics include better access to a range of policy excesses (higher excesses can lead to lower premiums), the burden of Government charges and features of intermediary charges.

On intermediary charges, owners’ corporations are encouraged to satisfy themselves as to the appropriateness of fees and commissions and it directs attention again to the conflicts of interest explained in the Phase 2 paper that are inherent in the commission rebate/broker fee system.

An availability issue also considered is replacement value cover. Legislation in every State and Territory requires owners to have replacement value cover but underwriters do not offer it. Instead they offer sum insured cover and leave the owners with responsibility for its adequacy. There has to be a better way.