Leading strata management company PICA Group says it may cancel its membership of SCA NSW over the peak body’s stance on commissions reform.

As previously reported, Strata Community Association NSW has pledged its members will begin phasing out the sharing of insurance commissions and broker fees from the start of next year.

Contracts will not include a commission option and remuneration for insurance-related work will be provided under fee-based arrangements, in consultation with property owner clients.

The move follows intense media scrutiny on the sector over the past year, and industry consultant John Trowbridge’s report, which was critical of “opaque” commission sharing arrangements. 

However, PICA Group MD and CEO Bobby Lehane says his company was not properly consulted before the SCA’s announcement, and he fears the removal of insurer-paid commissions could shift up to $150 million of annual costs onto consumers.

Mr Lehane is also concerned that insurers will fail to pass on savings to consumers, as companies “inevitably optimise profitability”.

PICA Group proposes an alternative reform whereby a fixed fee, paid by insurers and adjusted to the consumer price index, replaces commission-based payments. Owners could still pay an equivalent fee directly if they choose to.

“Consumers should not bear the burden of insurer distribution costs,” Mr Lehane said. “Removing insurer payments without a sustainable replacement mechanism risks increasing costs for owners and destabilising the strata management sector.  

“We support reform, but it must be fair, transparent and economically viable for all parties: the consumer, the insurers, the broker and the strata managing agents.”

Mr Lehane says PICA Group is considering cancelling its SCA NSW membership.

“The peak body and the largest strata management organisation are on completely different pages,” he told insuranceNEWS.com.au. “The position the SCA took wasn’t one they had consulted members about. If your peak body doesn’t represent things that are important to you, that you believe are important to the sector, then what’s the point?”

Mr Lehane argues the SCA is “struggling to understand the complexity” of larger organisations such as PICA Group.

“Decreeing that a change will be implemented on January 1 might work if you have 50 plans to manage, but not if you have 11,000. It’s not practical.”

SCA NSW, which is holding its annual convention today and tomorrow, says “transparency and trust” are the reform’s aims, and brokers and underwriters have committed to passing on savings.

“Owners will be able to know exactly what they’re paying their strata manager versus their insurer and broker,” a spokesperson said.

It says members were surveyed before the announcement and it will continue to work with members, insurers and industry stakeholders.

“Consultation with members is continually ongoing, with a significant number of members having already transitioned to a fee-for-service model before the announcement,” it said.

The SCA says its board understands PICA’s alternative proposal, but “many members already do not receive insurance commission, and they claim their idea is better”.

The NSW government continues to consider a ban on strata managers taking a share of insurance commissions. It has asked the state’s productivity commission to report on potential impacts by February 27. 

In a speech to the SCA’s convention today, NSW Fair Trading commissioner Natasha Mann praised the peak body’s position.

“I want to recognise the leadership that SCA NSW has shown in announcing a transition away from accepting strata insurance commissions,” she said.

“The leadership SCA NSW has shown on this issue makes clear that you want to be part of the solution – helping to restore confidence, protect the profession’s standing and ensure we have a pipeline of talented professionals wanting to join the sector.”

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