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NSW avoids strata insurance commission ban

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The NSW Government appears to have backed away from banning the payment of insurance commissions to strata managers, but it could legislate to require full disclosure.

“Fair Trading receives regular complaints from owners’ corporations that they are being forced by the terms of their agreement to enter into insurance contracts they feel are not in their best interests,” Fair Trading Commissioner Rod Stowe told the recent Strata Community Australia (SCA) convention.

A requirement for strata managers to fully disclose the circumstances and amount of commissions will be considered in a position paper due soon.

NSW will seek to further regulate third-party strata commissions, addressing “conflicted payments” under agency agreements, including commissions from insurance companies, Mr Stowe says.

Consumer, Trader and Tenancy Tribunal powers will be expanded to enable orders on agency agreements where strata agent charges are unfair.

“Commissions have the potential to influence the behaviour of managing agents and induce them to make decisions that are not in the best interests of their clients,” Mr Stowe told the convention in Sydney on November 1.

NSW Fair Trading Minister Anthony Roberts hopes the position paper will be released in the next few weeks, followed by a bill to Parliament early next year.

Insurer CHU says scrapping commissions will not “materially drive the direction of premiums”, but strata levies will need to increase. Otherwise, business collapses and takeovers could rise in the industry, bringing higher fees.

Commission is not charged in addition to insurance premiums, CHU says. It is included and is usually less than brokers receive. Full disclosure would have a minimal impact on strata insurers because requirements already exist, it says.

Some strata managers say banning commissions would be short-sighted, a CHU spokesman told insuranceNEWS.com.au.

NSW has more than 1500 licensed strata managers, servicing more than 60% of the state’s 72,000 strata schemes. Owner groups seeking lower insurance premiums want commissions banned, but SCA says owners may face higher levies and less choice.

“What’s encouraging is that the Government’s language appears to be moving away from simplistic and quite destructive talk about banning commissions,” SCA CEO Mark Lever said.