Have you taken the time to consider one of the highest bills of strata living? See our tips here. OCN's Survey on Strata Managers had some surprising results.
Why should an Owners Corporation in a large (more than 100 lots) strata plan carefully consider insurance issues?
Cost—the average annual insurance expenditure on insurance in a large strata plan is around $130,000. This is a major cost item for any strata.
Asset Protection—the average assets requiring protection in a large strata plan exceed $100 million. Inadequate or inappropriate cover can have very serious consequences for lot owners.
Informed Decision-Making— Most Owners Corporations just “sign on the dotted line” when it comes to insurance, based on the recommendation of their strata manager and/ or insurance broker. However almost every Executive Committee member, when asked, admits that they would like to better understand their insurance cover and the process by which the cover is put in place.
Questions to Ask / Points to Consider
Is your Strata Manager receiving a commission or an agent fee on insurance policies from the insurance broker?
Most do, typically around 15% of the premiums (in other words a standard premium of $130,000 includes a $20,000 commission).
Is your Strata Manager prepared to forgo or rebate any commission received back to the Owners Corporation?
At a minimum, will your Strata Manager disclose specific details of any commissions received? Some strata managers will agree to forgo their commission, so it pays to ask. An alternative to hidden commission arrangements is to negotiate a separate, agreed fee with your Strata Manager for assisting the Owners Corporation to arrange its insurance. The Manager should be required to justify the fee, based on the work done.
Is your Strata Manager prepared to allow the Owners Corporation to deal directly with the Insurance Broker and is the Broker willing to reduce the premiums by the commission amount?
Note however that dealing direct will mean that the Owners Corporation must be prepared to undertake research and negotiations with the Broker, which can involve considerable time and effort.
Have you investigated all opportunities to rationalise your insurance requirements?
The are several ways in which Owners Corporation may be able to reduce their premiums, for example by consolidating different policies, aggregating their insurance cover with other strata corporations if they are all part of a larger complex or (after careful consideration of the implications), agreeing to higher excesses or reduced sub-limits on specific elements of the insurance cover.
Are there sources of insurance expertise that you can use to assist with negotiating your insurance needs?
There are independent insurance advocates who, for a fee, can assist Owners Corporations to decide their insurance needs. In many strata corporations there may be individual lot owners with insurance industry expertise who are only too willing to assist their Owners Corporation if asked. In any case the Owners Corporation may wish to co-opt interested lot owners as an informal “insurance sub-committee” to assist with the shot-term workload.
Have you considered conducting a competitive insurance tender?
While the number of insurance companies offering strata insurance is relatively limited some Owners Corporations have been able to secure significant savings through a competitive tender. A tender also enables an Owners Corporation to tailor its desired insurance cover specifically to its needs and helps to avoid paying for cover that it does not need or want.
Is your proposed Insurance Company easy to deal with and with a good track record of honouring legitimate claims?
You are entitled to be satisfied that your proposed insurer will promptly and fully settle your claims. You might ask either the Insurance Broker for references from existing customers of the Insurer and for their claim process to be fully explained.
Do you give insurance the time and effort it deserves?
Too many Owners Corporations dispose of consideration of their insurance in a few minute a years, with little or no serious discussion. It is a good idea to insist that your Insurance Broker and / or Insurance company make a formal presentation annually to the Owners Corporation, with the full proposal available well in advance of the meeting at which insurance is to be considered so that Executive Committee members have time to thoroughly review the terms.
"The whole strata community owes a huge debt of gratitude to you and the OCN executive. Much appreciated."
"I am very pleased with my membership of OCN, the discussions through sharing emails is very valuable in increasing my knowledge of strata living, the laws and EC responsibilities. I think I am better armed to tread the minefield of the managing agent responsibilities and the necessary action of the EC to monitor the contradictory interests of the agent."
"I so appreciate being part of the OCN email forum. It provides a great opportunity for sharing ideas and learning"
Ingrid, Neutral Bay
"I must say that I have enjoyed and found consolation in the discussions that have been part of the email chain (forum). I did attend one general meeting and found that it was informative and the people "running the show" were knowledgeable and dedicated to the tasks that had taken on. In short, well done. You and the committee have and continue to support the Strata Community in a very professional manner."
"Nothing is easy in Strata World and we have been in building defects “mode” for some years – hopefully almost at an end but that process has been most demanding and difficult but again – greatly helped by the experience and wise counsel of other members of OCN."
Pat, St Leonards
"Keep up the good work, as many (if not most) strata schemes need your help, advice and representation at all levels of government."
Jann and John, St Ives
"I belong to OCN because of its professionalism. I have found the meetings I have been to extremely well presented, to the point, and of course very topical and informative. Speakers on the whole certainly know their topic. My role of Secretary last year was certainly assisted with the coverage regarding TPG & other subjects. Member newsletters are also of benefit as the topics are specific to strata matters."
Graham, East Balmain
I have enjoyed attending the quarterly OCN meetings and the exchange of emails between other Executive Committee Members and think OCN is playing an increasingly important role as a voice for strata dwellers and representing us at Government level. I wish the organisation continuing success in the future."
Pauline, Kings Cross
"The [forum] response to my question was amazing and really useful. The OCN community is wonderful so thanks."
"I would like to thank you all for the important effort that you are all putting in to look after apartment owners and tenants. It is so valuable and you are heroes. I would not have been able to deal with my duties as a strata chairman without your advice and assistance."
"The OCN is invaluable – many thanks."
Bill, Surry Hills
"OCN is proving invaluable"
Sue, Neutral Bay
"Thanks to all at OCN for your continuing efforts to keep us up to date with current strata information and advice...it has been very helpful to us"
"When my wife & I first encountered a problematic Executive Committee I heard that OCN was a great help (from a Strata manager whom I knew) so we both joined and have gratefully used the on-line information sources. We continued to happily rely on OCN’s assistance when we progressed to Committee status & later as Chair & Secretary of our Committee. I still use OCN in my current role as Treasurer."
"Thanks to OCN for being such a rich resource of trustworthy information about strata matters."
"I wanted to extend my personal thanks for the very informative & interesting event today. The OCN team did an outstanding job in the organisation of this event & I enjoyed it thoroughly. The quality of speakers, the flow of conversation & interaction from the attendees - first class …& of course, the amazing Jimmy T - always a delight."
"OCN does a great job in providing a really valuable service to Strata owners."
"I am sure my appreciation of your good works is echoed by many in the Stratasphere. Keep up the good work."
John, Elizabeth Bay
"The OCN is probably one of the best, most informed and most informative groups I have been involved with."
"Once again, being able to discuss such things through this forum, helps clear the mind, puts things into perspective and helps one to understand their rights and to form a strategy if needs be. As a simple EC member trying to do what is in the best interests of lot owners, I truly value OCN and am grateful."