Brokers for strata properties should ask underwriters for premium quotes that exclude commission, with the body corporate instead paying the strata manager and broker directly, according to industry consultant John Trowbridge.

As a result, premiums should fall by 20%, the standard commission paid, he says on the Your Strata Property podcast produced by lawyer Amanda Farmer.

Mr Trowbridge, who has completed a review of strata practices, says sharing insurance commissions creates an inherent conflict of interest. The body corporate client is not a party to negotiations between broker and strata manager on how the commission is split between them, or a broker fee charged.  

Asked by Ms Farmer whether underwriters would pass on the 20% reduction, Mr Trowbridge said those that continued to include commission or did not reduce premiums would not be competitive.

He says in today’s market there may be no commission but a broker fee is sometimes charged to the body corporate, and the broker and strata manager split this on a 50-50 or 60-40 basis. 

He asserts the proposed change is not about reducing costs or payments to brokers. “This is about being fair and open and disclosing properly what the charges are by strata managers and brokers.”

Although brokers would receive less from the insurer, they would be sharing less with the strata manager.

Mr Trowbridge says some brokers and strata managers may fear how relationships they have built will change once their financial connection is broken, and he predicts a transition period while everyone in the market adapts.  

Find the podcast here.