Push to phase out strata insurance commissions gathers steam
New South Wales is leading the way in phasing out insurance commissions paid to strata businesses, in what has been described as a 'milestone moment' for the industry.
Momentum is building within the strata management sector to phase out insurance commissions paid to strata companies for taking out their policies.
The lack of transparency for those paying strata fees is behind the push to have the fees scrapped.
In New South Wales, where almost 1.5 million people live in strata residences, the Strata Community Association NSW (SCA NSW) announced what it described as a “milestone moment in strata”.
“Starting on 1 January 2026, SCA (NSW) members will begin a phased replacement of insurance commissions.”
From 1 January 2026, new SCA (NSW) standard management contracts issued by SCA (NSW) members will not include an option to accept commissions on insurance products and SCA (NSW) members using their own management contracts will also not offer the option.
Strata Community Association (SCA) NSW President Robert Anderson said the decision to make this phased transition in relation to insurance commissions was not made lightly or quickly.
“Undertaking this reform is about delivering transparency, trust, and showing leadership.
“For owners and committees, this reform will deliver transparency, accountability and pricing simplicity, while for managers and their businesses it will deliver certainty, business sustainability and improve trust and credibility with clients.
“Strata managing agents should be proud to talk about the value they bring to consumers and why they should be paid to carry out these critical tasks in relation to strata insurance, and this reform will deliver on that,” he said.
The SCA NSW decision follows ongoing scrutiny of strata insurance commissions and conflicted remuneration models, highlighted in the ABC’s Four Corners feature The Strata Trap (Sept 2024), and comes ahead of anticipated reviews by NSW Fair Trading and the NSW Productivity Commission.
Industry insiders expect regulators to consider whether strata insurance commissions should be banned entirely to reflect the fiduciary duty strata managers owe to owners’ corporations under agency agreements.
Any benefits for property owners?
Simon Ruben, the expert for strata management affairs at the Property Owners Association of NSW, told API Magazine strata insurance commissions should be entirely banned.
“Insurance commissions are not always clearly understood or recognised by strata owners and can vary in magnitude between strata managers, insurance brokers and insurance providers.
“Transparency of fees and charges is required throughout the industry.
“Some strata managers have previously been declining to accept insurance commissions; the practice of banning should be mandatory for the entire industry.
“The past purpose for receiving insurance commissions was to pay for the time spent by strata managers in researching/investigating insurance policies on behalf of owners’ corporations and ensuring the best most suitable policies and pricing was obtained for the owner’s corporations.”
He added that property owners won’t be the winners, in fact, quite the contrary.
“There will be no savings for strata owners by banning insurance commissions.
“Strata managers receive insurance commissions as part of their income stream and by reducing their income stream by removing insurance commissions it is likely they will be forced to create and charge additional service fees for negotiating suitable insurance policies and perhaps other services provided to owners corporations.”
Kate McHugh, co-founder of the Strata Futures initiative, took a different view, saying the proposed changes should deliver value to investors and strata owners.
“Shifting strata management from a fragmented administrative function, struggling to justify strata levies, to a professional service reflective of the legal and financial advice provided to this asset class should lead to improved performance of strata schemes, delivering value to strata owners and investors.”
Ms McHugh, and former NSW Strata Commissioner, John Minns, led Strata Futures, a nine-month industry initiative which brought together more than 60 sector leaders in March 2025 to explore high-risk issues, research gaps and opportunities to strengthen the sector. The final Strata Futures report put forward 64 recommendations for a viable, profitable, reputable and sustainable strata sector.
If acted upon, these recommendations would empower owners corporations to better manage their buildings, protect and grow asset value, and improve the liveability of apartments and townhouses for millions of Australians, with the support of strata managers.
“While the sector faces some fundamental challenges, including how it conducts business reputably, there is now a roadmap to support strata managers and owners that will deliver long-term value for Australian property owners and investors, recognising residential strata as a distinct asset class within Australia’s economy and housing system,” Ms McHugh said.
Two commission models
The strata management industry has typically obtained insurance on behalf of owners corporations in return for either a direct commission from insurance providers (authorised rep model) or for a share of commissions earned by a preferred broker (the broker model).
The vast majority of strata managers opt for the authorised rep model, according to Vantage Strata, which added that the commission earned in either model is about 20 per cent of the base premium.
In strata, an Authorised Representative (AR) Model involves a strata manager becoming an authorised agent for an insurer or insurance broker to arrange insurance for strata properties. This allows the strata manager to provide specific insurance services, such as offering general advice and handling administrative tasks, under the licensee’s (insurer’s) authority. The strata manager receives commissions for these services, which are funded by the insurer to cover the administrative burden of managing insurance for strata properties.
The Broker Model describes the arrangement where a specialised insurance broker, rather than the strata manager or owners, is directly engaged to arrange insurance for the strata community. The broker uses their expertise to find and negotiate suitable policies from a range of insurers, receiving a commission from the insurer for placing the business. This approach aims to leverage the broker’s specialised market knowledge and negotiation skills to secure the best coverage and terms for the strata community, potentially reducing workload for the strata manager and enhancing the outcome for the owners.
More than 4.2 million Australians live in more than 3.2 million strata residences; by 2050, half the population is likely to live in apartments.
Regulations around strata management, including insurance commissions, are fragmented between the states.
