- The Strata Community Association commissioned the report from Deakin University
- Strata insurance costs have spiraled to over $1 billion last year
- Starta property managers are caught in a "complex web", said SCA President
The spiralling costs of strata insurance and the high burden of government taxes, duties and levies on premium prices has been highlighted in a recently released industry-first report.
The Strata Community Association (SCA) commissioned report – A data-driven holistic understanding of strata insurance in Australia and New Zealand – was conducted by Deakin University with lead author Dr Nicole Johnson.
The report reviews how strata insurance affordability and availability issues can be resolved, along with the value of the strata manager when navigating complex insurance processes, such as carrying out insurance services for stratas.
454 strata managers and 280 strata lot owners were surveyed as part of the report, which included analysing 58 versions of state and territory strata management agreements and investigating 38 pieces of legislation.
Andrew Chambers, National President of the SCA, said the report provides never-seen-before insights into the strata insurance industry.
“The report shows us three things in particular, and that is just how much work strata managers do and how valuable they are in the process, how much insurance costs have risen over the past five years and the affordability and availability issues that exist and a comprehensive overview of strata insurance service models,” said Mr Chambers.
“Breaking down the total costs of insurance, premiums and the amount of duties, levies and taxes charged was a real eye-opener to just how much the consumer is paying in taxes just to take out a policy that is compulsory.
Andrew Chambers, SCA
“If you’re taking out a strata insurance policy in Australia as a strata community then more than a quarter (27.45%) of what you pay on average goes to government taxes, stamp duties and levies. In NSW that figure is closer to 40%.”
Mr Chambers noted that over the past five years, insurance costs have spiralled upwards from $619 million in 2016 to $1.08 billion as of last year.
Recommendations in the report include reducing or abolishing stamp duties on insurance premiums, and analyse ‘stacking taxation’ – such as the ‘taxes on taxes’ situation when applying GST – and replacing emergency levies with general revenue.
The report highlighted many parts of Australia, especially Northern Australia, where some strata communities struggle to find available policies thanks to reinsurance market costs, global climatic events, Australian climatic events, building defects and cladding risk.
During the 2016-20 period, storm damage ($438 million), water damage ($362 million) and fire damage ($248 million) were the top three claims cost by loss.
“Our weather will always be unpredictable, but our approach to insuring against it does not have to be,” said Mr Chambers.
“Funding for mitigation as well as an effectively introduced reinsurance pool in northern Australia and better building regulations are among the measures that will help drive down premiums and drive up consumer protections.”
The report noted 47 individual strata insurance services are regularly provided by strata managers – something he labelled as a “complex web”.
“Strata insurance is complex and strata communities need a trusted person to navigate them to their best outcome,” he said.
“What we want to see from this report is a recognition of the value the strata managers bring to the insurance process and the work they carry out providing insurance services.”