Amid long-running discussions between the strata industry, brokers, the Strata Community Association, consumer groups and the NSW government, MGA executive chairman John George shares his views on the insurance commissions debate.

While each state has its own strata legislation, two common core requirements are generally outsourced to strata management companies.

1. To maintain the property – to make sure common areas, facilities and the building as a whole are properly maintained. Of necessity, this includes affiliated secretarial services. 
2. To adequately insure the property for its replacement value and secure property owners’ liability cover.

Our business, the MGA and Whittles group of companies, essentially has two divisions, insurance and strata management, that deal with these responsibilities.

It is hardly the conflict of interest that is being shouted about from the rooftops; we are just doing our job. Full disclosure of fees and commissions is made to our client owners’ corporations and our ownership details are disclosed.

We are fulfilling the two legally mandated functions and being remunerated fairly for them.

The real problem lies with manufactured schemes with excessive fees charged on top of insurer commissions without clear disclosure. It is fair to say if clients knew they were being charged up to 45% on top of insurers’ net premiums, they would be horrified. This is gouging.

Disclosure is key. My view is that a fair maximum total commission and fee should be mandated at, say, 23%-25% of the base premium.

In the event an amount above this is charged, that excess sum MUST be disclosed in a separate and upfront legally mandated document that discloses the actual extra percentage and dollar charge.  

This will ensure it is identified to the client and will stop the gouging. Heavy penalties should apply for non-compliance. It is not price-fixing, because the opportunity remains to charge more in extraordinary circumstances. However, it MUST be expressly agreed by the corporation involved.  

To just ban these payments is short-sighted, draconian and a “sledgehammer to crack a nut” approach.

Our businesses, broking and strata, handle thousands of claims, particularly in these days of extreme weather events.

Underwriters and our clients rely on us to deal with such claims. Of course, brokers and strata managers must be remunerated for these duties.

The SCA really jumped the gun by initially suggesting membership was contingent upon its members receiving no remuneration for insurance-related work. I note it has changed its stance in this regard, and compliance with this rule is now voluntary. Pretty weak – it should come out altogether.  

However, the improperly disclosed overcharging that has been going on must be stamped out. 

John George is the executive chairman of Australia’s largest privately controlled insurance brokerage, MGA Insurance Brokers, and the country’s third-largest strata management operator, Whittles Strata Management.