NSW Strata Managers to Eliminate Insurance Commissions by 2026

Under the new policy, SCA NSW members issuing new standard management contracts will no longer have the option to accept commissions on insurance products. This change applies to both SCA NSW's standard contract templates and any custom agreements used by members. The association's leadership emphasizes that this reform is designed to enhance transparency and build trust between strata managers and property owners.

Robert Anderson, President of SCA NSW, stated, "The decision to make this phased transition in relation to insurance commissions has not been made lightly, or quickly. Undertaking this reform is about delivering transparency, trust, and showing leadership." He further noted that the change is intended to provide clarity and accountability for property owners while offering business certainty for managers.

Historically, strata managers have received commissions as part of the insurance supply chain. The new model will see these commissions replaced by direct fees for service and an expansion of agreed services, with terms negotiated in consultation with clients. This approach aims to eliminate potential conflicts of interest and ensure that property owners receive unbiased advice regarding their insurance needs.

The Australian Consumers Insurance Lobby (ACIL) has welcomed the move, describing it as a step toward clearer pricing and improved alignment with owners' interests. ACIL Chairperson Tyrone Shandiman emphasized the importance of closing loopholes, particularly related-party arrangements, and ensuring that all financial benefits are transparently disclosed and that any savings are passed through to owners.

This commission phase-out coincides with a suite of new legislative reforms in NSW, which took effect on July 1. These reforms include enhanced transparency in contract terms, new reporting obligations for strata managers, and the integration of sustainability measures into annual general meetings. Strata managers are now required to provide detailed written reports to owners corporations every six months, outlining contractual tasks and activities.

While consumer groups have largely supported the changes, some industry leaders have expressed concern about the financial impact on strata management businesses. Bobby Lehane, CEO of PICA Group, warned that removing insurance commissions could significantly affect operating margins in a sector already facing profitability challenges.

According to a PICA survey, property owners are divided: 34% support retaining commissions, 38% prefer a fixed-fee model funded by insurers, and 29% support eliminating commissions if other fee structures are adjusted.

Key benchmarks for the sector include the mandatory implementation of the Strata Insurance Best Practice Disclosure Guide for SCA NSW members on July 1, 2024, the implementation of the SCA National Code of Ethics on July 1, 2025, and the requirement that new contracts by SCA NSW members will not include insurance commissions starting January 1, 2026.

With over 91,000 strata schemes in NSW, encompassing more than 1 million lots and a total insured property value of $486 billion, this reform represents a significant shift in the state's strata management landscape.