The role of a strata manager in managing strata insurance is multifaceted and complex, especially within the context of strata and community title insurance. Here's a summary of the key points from an article by Strata Insurance Services:
Key Responsibilities of Strata Managers in Insurance Management
- Securing Adequate Coverage: Strata managers play a crucial role in ensuring that strata communities have the right insurance coverage. This involves selecting appropriate insurance providers and crafting comprehensive policies.
- Legal and Fiduciary Duties: Strata managers, acting as agents, have both contractual obligations and fiduciary duties to the strata community. They must adhere to statutory insurance maintenance obligations and ensure the community's best interests are served.
- Engaging with Insurers and Brokers: Strata managers may engage directly with insurers or collaborate with general insurance brokers. In doing so, they must formalize their appointment as representatives of Australian Financial Services Licensees through written agreements.
- Transparency in Broker Engagements: When introducing brokers into insurance transactions, strata managers must disclose all commissions and fees. They are accountable for ensuring that these costs align with the value provided and do not breach their fiduciary duty.
- Navigating Legal Complexities: Strata managers must navigate a web of legal, contractual, and fiduciary obligations to ensure optimal insurance coverage for strata communities.
Condo towers are getting higher and higher and so are strata insurance rates.“Throughout B.C., too many people have seen the cost of strata insurance sky-rocket,” says Finance Minister Carole James. [1]
The province says premiums have shot up a staggering 40 per cent in British Columbia in the last few months.And while there are many reasons for the sharp rise, one of the issues is insurance referral fees — or kickbacks — for property managers. “When you have undisclosed fees in exchange for business, this is where agents really aren’t acting in the best interest of the clients anymore, they’re acting in their own interest,” says Tony Gioventu of the Condominium Homeowners Association.
New legislation will try and fix the problem which includes a ban on referral fees for strata property managers or other third parties — which B.C.’s finance minister says can be up to 20 per cent of the cost of the insurance.“That’s a very large amount that’s going into commission fees so by disclosing that, we again that will help create some competition,” James says.Strata property managers in Victoria say 99 per cent of the companies here use an agency agreement that requires them to disclose any fees they receive.But stakeholders say that’s not happening — and believe information is being withheld.“They have to disclose the amount and they’re not disclosing the amount,” Gioventu claims. “We’ve seen disclosures that attempt to try and indicate they’re being disclosed but they’re not.”
Purpose
BC Financial Services Authority (“BCFSA”) is issuing this Advisory to inform real estate licensees of a new Rule from the Insurance Council of British Columbia (“Insurance Council”) that addresses potential conflicts of interest between licensed insurance agencies and strata managers in relation to strata corporation insurance. The Rule comes into effect on July 1, 2023.
Background
The Insurance Council is introducing a new Rule (7(11.2)) that will prohibit insurance licensees from conducting strata insurance business for strata corporations that are managed by an insurance licensee’s affiliated property management company (e.g., strata management brokerage).
Going forward, real estate licensees and brokerages that are licensed to provide strata management services need to be aware that when there is common ownership between the insurance licensee and the brokerage providing strata management services to a strata corporation, the insurance licensee cannot engage in insurance business for that strata corporation.
The Insurance Council is establishing this Rule to address potential conflicts of interest where insurance agencies and firms affiliated with property management companies could refer strata insurance business to one of their subsidiaries, rather than an insurance provider that better meets the client’s best interests.
Strata property managers should inform their strata council clients of these upcoming changes and may wish to seek instructions from affected clients about the placement of strata insurance policies, including:
- Obtaining and reviewing quotes; and
- Planning for operational impacts for the strata corporation (e.g., in relation to premiums or coverage).
Where an insurance licensee is required to terminate business with a client, the insurance licensee must provide adequate notice of their intent to withdraw services.
The Insurance Council’s new Rule builds on the 2020 amendments to the Financial Institutions Act, which prohibit the payment of referral fees to strata managers for the sale or renewal of strata property insurance.
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