Strata Insurance – Tips and Pitfalls to Watch in 2024

Strata insurance is compulsory. So, the ongoing challenging insurance market and cost- of-living pressures mean it’s crucial to spend time buying your insurance protection wisely.

The outlook for 2024

There’s been considerable focus on improving insurance affordability and availability.

• The Federal Government-backed Cyclone Reinsurance Pool is providing some premium pressure relief in Northern Australia.
• The NSW Government recently removed its Emergency Services Levy on premiums – the last major State to do so.

Ahead of the 2023/24 summer storm season, there were signs of some premium increases abating. We hoped green shoots emerging from new underwriting entrants might signal the end of an extremely protracted hard market cycle. But the flooding following Tropical Cyclone Jasper and WA bushfires in December may slow that progress.

Market conditions seem likely to remain tough, particularly in areas prone to catastrophic weather events.

3 tips to support you in 2024

1. Understand your cover

• The sum insured value covers the cost of replacing a property. This includes the cost of building materials and trade skills, bespoke design features like open balconies and jetties, plus professional fees like architects and engineers. Owners must insure for full replacement value to avoid the sharing of liability if the insurance proves inadequate. Arrange for regular valuations to avoid this.
• Factors like a property’s location, age, unique design features, shared facilities and any special equipment on site etc, will determine the need for optional or opt-in insurance covers like machinery breakdown, flood or catastrophe.

Always check the adequacy of sums insured, including sub-limits which could be negotiated upwards to ensure enough cover for loss of rent and temporary accommodation if there’s a long rebuilding process.

Also, consider the litigation exposure to Office Bearers and the scheme’s potential need for legal defence.

2. Review your general excess

Increasing your excess may make a difference to the premium.

Insurers are using excesses to manage premium increases and minimise administration for claims under the excess amount.

A $2,000 general excess is typical now. But if you can absorb and agree to fund losses under a higher excess, it’s worth seeking quotes.

Be aware, insurers may impose a higher excess, like $10,000, when there’s a large sum insured.

Strata schemes should plan for who will pay the excess for a claim. Depending on the circumstances, owners could find themselves responsible for paying the excess. A plan avoids any surprises.

The cost vs value of Flood cover

Don’t let this be you…

Following a severe storm, a property was inundated by water that escaped from a nearby river due to excessive rainfall. Although Flood cover was available, the strata scheme had chosen not to purchase it. The water caused substantial damage to common property on the lower levels.

• 10 centimetres of water will damage kickboards, skirtings, doors and lower walls.

• 20 centimetres of water will damage kitchen, vanity, bedroom and laundry cabinetry and quadruple the initial loss.

Without Flood cover, the strata scheme must pay all repair costs, funded by either a loan or an owners special levy.

3. Work with a specialist broker

Working out what type of insurance cover is appropriate isn’t easy. But getting it wrong can be an expensive mistake.

A broker can work with your strata manager to assess and manage your risks, before providing advice on appropriate insurance solutions. This means you can be confident your cover suits your situation at a competitive premium.

As a specialist in insurance and risk management, brokers offer more advice and choice than individuals or businesses can negotiate by dealing directly with an insurer. Brokers leverage their portfolio buying power and provide access to the most specialist, tested, trusted, and efficient markets. They’ll provide you with a greater choice of underwriters and options – whether it’s the type of cover, cost of premium, their service, or claims reputations etc.

Some argue using a broker is more expensive. But consider the cost of buying the wrong or inadequate cover, or the cost of your time if you need to subsequently deal with non-specialists and/or problematic claims.

Adding value with cover selection and claims advocacy

If the unfortunate happens and you need to make a claim, BCB’s dedicated state-based claims teams provide ongoing support and guidance throughout the process. This is particularly valuable for complex and difficult claims negotiations or during times of large weather events and natural disasters.

We’ll advocate for you with insurers and we’re proud of our outstanding claims record. We’ve built a leading reputation for succeeding with claims that might otherwise have been declined through our diligent pursuit of all relevant information.

Call us on 02 9024 3850, we’re here to help.