Why are strata scheme insurance premiums rising?
Strata management is a dynamic world, and the rising costs of strata scheme insurance can seem quite confronting. In the last 12-18 months, there has been a notable upswing in residential strata scheme premiums due to several factors, including policyholders augmenting their building sum insured, recent natural disasters and industry-wide rate increases.
With a decrease in specialty strata insurers in the market, competition has diminished, leading the remaining entities to adopt more selective risk appetites.
With over 40 years of strata management expertise, ASSM can offer valuable insights into the current strata scheme insurance landscape and guide you to securing an optimal quote tailored to your needs, ensuring informed decisions for safeguarding your strata investments.
Rising premiums explained
According to Honan Insurance Group, premiums have increased by about 15% in recent years, and for the immediate future, they advise committees, lot owners and body corporate managers to budget for 15-20% premium increases for claims-free schemes and 30% for those with more complex claims histories.
As for the key drivers behind the escalating strata scheme insurance premiums, the situation is intricate. Soft market conditions, characterised by below-market-rate premiums, have led to underwriting losses where total claims paid align with or surpass premiums collected. The mounting expenses are concurrently driving up underwriting costs for insurers, who are contending with increased expenses in reinsurance.
Additionally, labour shortages and overarching inflationary pressures are contributing to heightened claims costs and delays in the procurement of materials. The aftermath of the aforementioned natural disasters, including floods, bushfires and cyclones, has also inflicted catastrophic damage on homes, accruing estimated costs exceeding $8 billion.
Your risk profile and strata scheme insurance requirements
With the rising costs of strata scheme insurance, insurers will also be carefully evaluating their renewal portfolios. This is where your risk profile will matter. Strata schemes with poor risk profiles will have more questions to answer and will need to provide additional information on items such as asbestos reports, building defect reports, dilapidation reports, valuation reports and more.
In NSW, strata schemes must have mandatory insurance coverage, including building insurance, public liability insurance and work health and safety insurance. Regular valuations are crucial to ensuring adequate coverage.
Responsibility for insurance lies with the treasurer unless delegated to a strata manager. Insurers may offer additional policies, such as voluntary workers insurance, shared contents and temporary accommodation, though these are optional. Not having the right insurance exposes the strata scheme to risks, potentially hindering the ability to cover unexpected damages or legal costs.
Regular communication and understanding of the strata by-laws related to insurance responsibilities are essential for effective coverage management.
Why choose All Suburbs Strata Management?
As strata scheme insurance premiums increase for various reasons, it is essential to ensure proper insurance coverage for compliance.
At ASSM, we have over 40 years of experience in strata management, and we are experts in residential, community, commercial and industrial strata schemes. We can help you find insurance.
Strata scheme insurance provides coverage for the building and public liability, but it does not extend to the contents of an owner’s property, which remains the responsibility of individual residents.
It is advisable for residents to secure their own contents insurance. We recommend that our members obtain insurance quotes through Honan for this purpose.
If you are considering buying into a strata scheme or want to engage a professional and qualified team, contact ASSM today.
