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Saving on Strata Insurance

Saving on Strata Insurance

Both the Commissioner for Body Corporate and Community Management in Queensland, and the Insurance Council of Australia, provide excellent information about how to manage the costs of strata insurance.

The Insurance Council of Australia has released:

While they are more general in nature, and aimed at providing information for strata owners across Australia, these publications contain useful information in relation to what you can expect and how to manage the insurance process.

Of particular use to owners in Queensland are the fact sheets released by the Commissioner on:

The first fact sheet contains valuable information about what the statutory insurance obligations in Queensland are. When you understand what insurance must be maintained (compulsory insurance) and what insurance may be maintained (voluntary insurance) you are better able to consider competing policies. That will lead to an informed discussion, usually at Committee level, as to the pros and cons of the various types of voluntary insurance. Particularly, whether voluntary insurance will assist with the risks that the Body Corporate can reasonably expect, in its situation and with its peculiarities.

The Commissioners fact sheet with tips to reduce insurance premiums is a good way to finish the insurance process. That is, after understanding the compulsory insurance obligations, deciding which voluntary insurance is desirable and obtaining quotations for policies that cover those risks, a Body Corporate Committee can then consider each one of the Commissioners tips to try and drive the price of the insurance down.

It’s also critically important to understand what insurance will not cover. A straight forward example is damage to your building arising from an occupier’s failure to maintain their property. Body Corporate managers have told us that in the last year or so one of the most common insurance claims is for water damage to a unit, and typically at least the unit below, from a burst washing machine hose. A washing machine hose is usually under pressure at all times (you leave the taps on and the washing machine controls the flow of water into the machine). That means the hoses will eventually fail. They are an easily replaceable item which do not require a plumber to fit and can be purchased at a regular hardware store for somewhere around $30 a hose.

Insurers can, and are, denying claims based on burst hoses that have failed over time. A switched-on Body Corporate Committee, or Body Corporate Manager, would raise this, along with a number of other similar issues, as part of an annual maintenance checklist for owners.

By following the processes above you should not only reduce the cost of your strata insurance, you’ll also reduce the number of un-insured events.

This article was contributed by Michael Kleinschmidt, Director – Stratum Legal.

Leave a Reply

  1. Patrick O’Leary

    Few if any of the accompanying “tips” for limiting strata insurance costs are of any real value in an environment where the market has failed, as it has in North Queensland. Not only is there virtually no effective competition among providers, so that we face monopoly pricing, but the BCCM Act compels owners to submit to the extortion. In addition, we face the special State Insurance stamp duty on the cost of premiums, which underwrites the cost escalation.
    It should be obvious that, in a situation where there has been a demonstrable market failure of this magnitude, government must step in to help those whom it compels. Only then can those affected begin to trust the “helpers”.

  2. Greg Grimmett

    Michael thanks for the article. Your ongoing contributions make the life of the Body corporate committee much easier
    In this article you mention that a switched on body corporate committee will mention washing machine hoses in their annual maintenance checklist for owners
    Do you know of a generic annual maintenance checklist which our Body corporate committee could use as a starting point?

  3. Michael Kleinschmidt

    Hi Greg,
    Thank you, it is a pleasure to help and positive feedback keeps us authors going!
    I don’t have a checklist to hand, but I suspect that your Body Corporate Manager may, or even some of the larger cleaning / maintenance contractors.
    It will, of course, also need to be adapted to each scheme.
    Good luck,

  4. Michael Kleinschmidt

    Hi Patrick,
    I’d agree with you that there has been market failure in relation to North Queensland.
    If you are interested, you might investigate the option for self insurance which is available under the Act.
    I have mentioned it to a number of clients over the past few years, and would love the opportunity to help formulate and have a scheme of self insurance approved by the Commissioner.