Poor strata industry practices exposed in ABC’s Four Corners program

In 2022 Bellrock made submissions responding to an “independent consultation paper” commissioned by Steadfast Group Limited. A summary of the release is covered in our article here.

Last night ABC’s Four Corners program brought to light some of the key issues we traversed in submissions to Mr John Trowbridge. This includes conflicts of interest, conflicted remuneration, and overcharging that was being disguised under vertically integrated corporate structuring.

Steadfast has ownership in a plethora of companies that form the services and advice required by owners’ corporations. This includes:

Given Steadfast’s diverse interests in these stakeholders, the ABC’s report set out to expose the extent to which owners and their schemes had access to appropriate, cost-effective strata advice and services.

It concludes that there is significant reform required to ensure consumers are not compromised by conflicted remuneration, which ultimately impacts the price of insurance. Indeed, during the report, Australian Competition and Consumer Commission Chair, Gina Cass-Gottlieb suggested that commission structures incentivised the poor behaviour.

Bellrock would agree with that statement, having observed many incidents of overcharging and hidden commissions. This was outlined in our previous submissions, and Steadfast and Mr Trowbridge had taken steps to address the issue by pressing the obligation of disclosure of placement commissions on intermediaries.

With respect to the ACCC Chair, this does not and will not completely address the major issue confronting owners’ corporations. Ownership by insurance industry stakeholders of the service providers relied upon by owners’ corporations requires significant scrutiny. Advice of service providers to owners’ corporations should not be skewed by conflict. Those compiling information and charged with seeking quotations for insurance as empowered fiduciaries should not be owned by those benefitting from the proceeds of insurance services. Those issuing a contract of insurance should not be the one advising the owners’ corporation whether the cover is adequate, appropriate and cost effective. An insurer paying loss under its policy for building works should not own the law firm advising on whether a claim is covered, or the builder performing the covered remedial works.

Bellrock provides risk advisory and advocacy services. It takes no undisclosed commissions. We have been open with our position on the disclosure issues present within the strata industry, and further detail them in our article “Understanding the distinct roles of insurers and intermediaries in the strata insurance marketplace”.

Steadfast has no ownership in Bellrock, which is privately held by its directors and staff. Bellrock subscribes to Steadfast’s systems to the extent they benefit our clients, organisational compliance and operational efficiencies. Our position remains that owners’ corporations and building management committees require compliant, adequate insurance priced competitively.

Our view is that more stringent regulation of the strata industry is urgently required to safeguard the interests of the growing number of Australians living in strata buildings. Equally, it is important to ensure consumer confidence in insurance advisors who do act in the best interests of their clients. We welcome the guidance likely to follow from the industry and regulator following the ABC coverage and Linton Besser’s report.