The Australian Competition and Consumer Commission (ACCC) will be asked to investigate the use of intermediaries in negotiating strata property cover.

The House of Representatives inquiry into residential strata title insurance, which issued its report last week, has recommended the ACCC determine whether there is evidence of improper or anti-competitive behaviour from brokers and the strata property managers who sometimes arrange insurance.

The report into the affordability and availability of strata cover says there is an apparent lack of disclosure in commissions and hidden discounts negotiated by intermediaries in their dealings with insurers.

“In particular the committee notes suggestions of a lack of transparency, accountability and independence from some body corporate managers and insurance brokers,” the report says.

National Insurance Brokers Association (NIBA) CEO Dallas Booth told insuranceNEWS.com.au brokers’ duties towards clients are clear and he believes any issues about intermediaries relate to strata managers.

But a spokesman for Graham Perrett, the Chairman of the Social Policy and Legal Affairs Committee which held the inquiry, confirmed to insuranceNEWS.com.au that the committee’s recommendation for an ACCC investigation involves both insurance brokers and strata managers.

The report says the investigation should focus on Queensland, with a preliminary investigation to be made public by October 1. It says more thorough investigation might be needed after that.

NIBA told the inquiry that body corporate managers play a significant role in sourcing insurance but are not best placed to recommend the most suitable or competitive product. 

It suggested the managers’ involvement might have contributed to fewer insurers in the Queensland market, as they would typically have a relationship with one or a limited number of companies.

Mr Booth told insuranceNEWS.com.au today the committee was given examples where brokers demonstrated they added real value to the process and “they are perfectly entitled to be rewarded for this work, in the usual manner”.

“The issue is not broker commissions. The issue is the cost of claims, the availability of cover, and the need for body corporates – north Queensland and elsewhere – to get proper risk management and insurance advice.”

The report acknowledges the differences between brokers and body corporate managers and accepts that brokers must disclose all fees and commissions.

“When a body corporate manager or management company negotiates directly with an insurer, there are not necessarily the same regulatory obligations placed on them for disclosure of relationship or commissions,” it says. “The committee considers this a severe deficiency in current requirement.”

In recommending the ACCC investigate intermediaries, the report notes that several people who made submissions to the inquiry had already approached the competition watchdog and found it reluctant to investigate their concerns.

The report says the committee recognises that while the ACCC cannot make rulings about whether premiums are set accurately, as a statutory authority with a public service duty the tone of some responses was inappropriate, being “bureaucratic, unhelpful and dismissive”.

It says the ACCC does have the authority to investigate cost drivers, market conditions and the relative profitability of the market.