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Insurance deals hurting home owners
Wednesday 30 March 2011
Insurance deals hurting home owners
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by Mat Churchill
Property owners in Port Douglas are being detrimentally affected by the relationship between insurance companies and body corporate managers, according to Roger Ward of nqhomeloans.com.au.
Mr Ward said that body corporate managers receive up to 20% commission from insurance companies to sell their product, and recent natural disasters have resulted in sky-rocketing premiums in Far North Queensland.
"I come from a financial services background and all I can tell you is the Federal Government has been spending, in incorporation with the States, I reckon four years, trying to get rid of relationships exactly like this.
"Where the main problem is, is that these people get paid on the amount of the premium, and they're not rewarded to benefit the customer."
Mr Ward, who sits on the body corporate committee of Portland Green, recently received an insurance renewal notice from GIO via his body corporate manager showing an amount payable of $14,598, up from $3,700 on the previous year.
An email from Portland Green's body corporate manager stated "…there were four companies that declined to quote for your insurance. This is the only company that has agreed to insure your building. We will now have to increase the proposed budget to cover this massive increase."
Mr Ward said commission rates, while mentioned in the renewal, need to be clearly communicated.
"Disclosure is one thing and they have disclosed it, but they certainly don't make it known to anybody upfront and when they're giving you these quotes they're simply not putting an addendum there that says, by the way, 20% of that premium will be going to them (the body corporate manager).
"What they're not telling you is that their insurance brokers are not accredited with every insurer in the market, and what was happening and specifically in Suncorp's case they dropped their broker market, and last year when we were insured with Suncorp we received instructions from our body corporate manager that Suncorp wouldn't insure us. But that wasn't the case. Suncorp just wouldn't use a broker and when I went to them direct they insured us."
On receiving the renewal notice Mr Ward contacted a number of insurance companies to gain quotes directly and the outcome was astonishing, resulting in a quote from WFI for just $4,122, $10,476 less than what was listed on the renewal notice.
"It's because we got involved in the process and went to the market ourselves we've reduced our initial cost by around $10,000. In our body corporate that would translate to $1,200 per lot owner in savings. That's $300 a quarter. . .the first call I made gave us a saving of $6,000.
"What's happening there is that some body corporates. . .if they're taking the word of their body corporate manager and accepting these quotes, they could be paying substantially higher strata fees purely because of that and for no other reason than the body corporate managers are fully informed and taking commission. The relationship is corrupted by the process."
An employee in the body corporate management industry who did not want to be named said that body corporate managers often access insurance brokers to do the leg work, resulting in a one-off "finders fee" for the body corporate manager, and a commission for the insurance broker, based on the renewal and policy amounts.
"We usually manage buildings for about $3 per lot per week, which is a cup of coffee. The way we can do that is through managing a lot of buildings at once. So we wouldn't necessarily get a quote and then write to everyone and ask for a quote because it's very exhaustive.
"The committee can go out and get quotes and we can give them the information they need, the claims history, (and) evaluation if possible. "