Strata Community Association NSW says the phasing out of insurance commissions from next year will be supported by training, as the shift to alternative arrangements may be challenging for some managers.

The commissions, which have subsidised upfront strata management fees, have been opaque and the change aims to provide transparent remuneration for insurance-related work as state regulation increases disclosure requirements.

“Strata managing agents should be proud to talk about the value they bring to consumers and why they should be paid to carry out these critical tasks in relation to strata insurance,” SCA says.

New management contracts issued by SCA NSW members from January will not include an option to accept commissions on insurance products, leading to a phased transition as older contracts lapse.

“The impacts on each scheme and each particular policy will vary widely,” SCA says. “Insurers and brokers will be responsible for passing on savings reductions derived from the commission to strata managing agents no longer making up part of the premium.”

NSW reformed strata regulations after the ABC reported last year on conflicts of interest and high insurance fees and commissions, and the state is looking to go further. Fair Trading is due to report by February 27 on potential impacts from banning commissions to strata managers.

SCA NSW says that when it refers to removing commissions, that includes broker fees, as they are defined under state legislation.

"Our intent is that strata managers will not receive commissions or broker fees from insurers or brokers under new contracts," it says.

Owners Network Corporation MD for services David Glover has welcomed SCA’s decision while noting other forms of conflicted remuneration also need to end, and it is important the commissions ban is not sidestepped.

“We think it is a good first step in getting rid of the conflicted remuneration that strata managing agents have been taking,” he told insuranceNEWS.com.au. “We know it is a brave move on behalf of the board of SCA NSW, but it is an essential one.”

Mr Glover says commissions and “kickbacks” that have emerged in insurance and other services have inflated profits for poor operators at the expense of owners.

“Fundamentally, we see them as unlawful, as we believe they are in direct conflict with an agent’s fiduciary responsibility,” he said.

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