Many strata owners are tackling the problem of increasing strata insurance premiums with seeking low cost alternatives. Whilst on face value this may appear to be an effective way to keep insurance costs down, the fundamental flaw with this approach is that it is often unknowingly reducing the insurance cover (both in type and amount) leaving owners vulnerable.
Many insurers that have not traditionally offered strata insurance are now entering the market at the lower end, identifying an opportunity to capitalise on the increasing premiums in the strata sector. What you need to keep in mind when dealing with these insurers is that strata is inherently complicated by the fact that a number of owners (whom may change over time), have to come together to insure the building. If you take on the responsibility of obtaining quotes, you need to be sure that you can answer all the questions thoroughly and accurately. It can be difficult for any owner at any point in time to know events that may have taken place in the building 30 years ago, or events that only involved some owners, but not all. If information is not disclosed fully and accurately, this could render a claim invalid, and the owner that provided the initial information liable. As it relates to the whole building, the sums involved can be substantial.
Whilst it is tempting for owners to take matters into their own hands, when they observe insurance premiums increasing, it’s important to keep in mind the causing factors. The increases may be attributed to factors such as reinsurance market costs, global climatic events, Australian climatic events, building defects and cladding risks. The underwriting risk appetites of insurers to accept buildings that have unrectified maintenance defects is also decreasing. Rather than looking at low end alternatives, a better approach is to ensure that your building has a clean record when it comes to maintenance and defect rectification. This will not only save on maintenance costs in the long term but will also keep insurance premiums in check. The Owners Corporation also needs to ensure that relevant increases are factored into the budget, so that there are no unexpected surprises.
Whilst on face value the savings from low end, non-strata specialist insurance companies are tempting, when compared with the personal liability involved if you get it wrong, the decision to insure you building with a strata insurance specialist is clear.
Owners taking it upon themselves to obtain insurance on behalf of the Owners Corporation with non-specialist companies with the aim of obtaining the cheapest price, need to be mindful of the personal liability that they are putting themselves in. Whilst the increasing premiums are frustrating, the best thing that an owner can do is ensure that their building has a clean record when it comes to maintenance and defect repairs. The budget should also reflect the up to date price.
If you are concerned about the price of the insurance policy for your building, we recommend finding out where your building is placed in relation to maintenance and/or defect repairs and working with your Strata Manager to ensure that they are dealt with efficiently.