Enhancing Your Strata Scheme’s Competitiveness for Insurers

In the evolving landscape of strata insurance, body corporates are increasingly obliged to lift their competitive edge in obtaining coverage. Insurers have become more discriminating in their choice of schemes to underwrite, and to meet their criteria, it’s essential to adopt a multifaceted approach. This guide explores the steps you can take to bolster your scheme’s appeal to insurers and secure comprehensive coverage.

Understanding the Competitive Landscape
Strata insurers have become highly selective in the schemes they choose to insure. Each scheme must prove its competitive edge by demonstrating a commitment to minimising losses for property owners and, consequently, insurers. The following components are pivotal in achieving this goal:

1. Compliance Reports
– Common Property Lifecycle Reports, 10 Year Plans, Maintenance Plans, and Servicing Plans play a crucial role in meeting insurers’ expectations. These reports also serve as instrumental tools for property owners to substantiate their property’s safety for residents and visitors.
– The core principle is the ability to ‘demonstrate’ that comprehensive compliance records are in place, and that actions such as regular maintenance are consistently carried out.

2. Selecting the right advisor
– One often overlooked aspect is the selection of the right advisor. Engaging a trusted advisor who possesses the requisite expertise, knowledge, and a profound familiarity with strata and community property is imperative. This ensures proper legislative compliance.
– It’s crucial to note that legislation in specific states mandates the qualifications of individuals who can carry out certain work.
– Additionally, it’s essential that your advisor remains independent and has no affiliations with entities involved in physical remediation work.

3. Building Insurance Valuations
– A prevalent concern is the undervaluation of insurance in strata properties is that it often leads to inadequate coverage. When the insurance policy does not accurately reflect the true value of the property and its contents, strata owners and residents may face significant financial burdens in the event of a disaster or damage.
– Undervaluation of insurance in strata properties can lead to non-compliance with state regulations. Under the Body Corporate and Community Management Act 1997, strata schemes are required to have appropriate insurance coverage that accurately reflects the replacement value of the property and its common area.
– The cost of obtaining updated valuations is far more economical than the potential fines and legal consequences for the body corporate.

4. Safety Reports
– Owners have a responsibility to identify and mitigate potential hazards and associated risks at their property.
– Insurers require tangible evidence that these potential safety risks have been identified and addressed. A well-prepared Safety Report with cost-effective and practical recommendation addresses both civil liability and health and safety concerns, mitigating the risk of legal action.
– A critical point to consider is the qualifications of consultants conducting Safety Reports. Engage only those with Cert IV Work Health and Safety (WHS) qualifications to assess risk accurately.

5. 10 Year Plan
– A meticulously prepared 10 Year Plan provides recommended contributions for each lot and each year of the plan. This approach is framed as a “Saving Plan” rather than a “Spending Plan”, operating on a “User Pays” basis.
– This methodology ensures the availability of a dedicated pool of funds for property maintenance and repairs. Insurers find comfort in schemes that prioritise property upkeep, as it reduces the likelihood of claims.
– Sinking funds are a designated account where funds are set aside for future major repairs and maintenance, while the 10 Year Plan outlines the anticipated major capital works and their estimated costs over a decade. By aligning these two components, body corporates can proactively allocate funds and execute planned maintenance, avoiding sudden financial crises and ensuring the property’s overall health.

By meticulously implementing these steps, your scheme can significantly boost its competitiveness in the eyes of the insurers, ultimately benefiting both property owners and insurers themselves. A proactive approach to property management and insurance valuation serves as a shield against unnecessary expenses and potential legal risks, safeguarding the interests of all stakeholders.

For more information, please check out Strata Umbrella’s services page: