The conversation around strata insurance commissions is changing quickly across Victoria, and I think the industry is reaching the point where it needs to ask some bigger questions.
After attending the recent Victorian Insurance Commissions – Top 10 Tips event, I kept coming back to one issue in particular: if commissions disappear, what happens to the work attached to them?
Owners corporations (OCs) deserve greater transparency around insurance costs. They should understand what they are paying for, why they are paying it and who is being paid.
But removing commissions does not remove the work attached to insurance.
Renewals still need to be managed. Claims still need support. Compliance still needs oversight.
The bigger question is how the industry funds that work moving forward and whether commissions, management fees or policy-risk models ultimately create the most transparent
Key Takeaways:
- Removing insurance commissions does not remove the work attached to insurance. Costs may simply shift into management fees or separate service charges.
- As transparency expectations increase, more owners corporations are questioning how insurance-related services are funded and whether current commission structures still provide enough clarity.
- A policy-risk model may offer a more transparent alternative to embedded commissions, but it also raises questions around future fees, claims costs and insurance premiums.
Why Victorian strata insurance commissions are under increasing scrutiny
Insurance commissions have historically been embedded within strata insurance premiums.
They have helped support the administrative and professional responsibilities associated with managing insurance obligations.
This includes:
- coordinating renewals
- maintaining compliance requirements
- liaising with brokers and insurers
- supporting claims administration when issues arise
As scrutiny around disclosure continues to increase across Victoria, many OCs are paying closer attention to how these costs are structured and explained.
From my perspective, that is a fair and necessary conversation for the industry to be having.
For many owners, the issue is no longer simply whether commissions exist.
The real question is whether the current structure provides enough clarity around what services are being delivered and how they are being funded.
How insurance commissions affect owners corporations in Melbourne
Insurance remains one of the largest ongoing expenses for many Melbourne OCs.
While commissions form part of the overall premium structure, they also help support the professional services strata managers provide throughout the insurance process.
However, even if commissions were removed entirely, the responsibilities associated with managing insurance would still remain.
Strata managers would still be required to perform many of the same insurance-related responsibilities, regardless of how those services are funded.
That is why I think removing commissions may not necessarily reduce costs for OCs. Instead, those costs may simply shift elsewhere.
In many cases, businesses may recover that revenue through:
- higher management fees
- insurance administration charges
- separate claims handling costs
I keep coming back to the same question: would OCs rather pay through embedded commissions, or through a model linked more closely to actual policy risk and claims activity?
A possible future model for Victorian strata insurance claims management
A potential future solution could reshape the Victorian strata insurance landscape entirely.
One possibility would be for insurers to formally recognise the professional services provided by strata managers during the claims process itself.
Under this structure, claims-related administration and support could become incorporated within the policy itself.
The cost would then be funded when claims arise, rather than through upfront commission arrangements.
In many cases, claims coordination services are already charged separately to OCs through additional claims-related fees.
This reflects the significant time and expertise involved in managing complex insurance matters.
This work often includes:
- contractor coordination
- insurer and broker liaison
- repair oversight
- compliance administration
- communication with owners throughout the claims process
I’d argue that a model tied more closely to policy risk and claims activity creates a more transparent framework.
Instead of embedding remuneration within premiums regardless of whether claims occur, costs become more closely connected to the actual servicing workload involved in managing claims.
It also means owners are potentially paying more directly for the professional work being performed, rather than ongoing commissions regardless of claims activity.
Could a risk-based insurance model improve transparency for owners corporations?
I also think this conversation highlights an important reality within the strata industry: claims management is a professional and time-intensive service.
Claims management requires significant administrative oversight and professional expertise.
It often involves coordinating multiple stakeholders, managing compliance obligations and supporting owners through complex insurance matters.
I’d argue that this addresses one of the key concerns driving the current discussion.
However, the questions remain.
Even if claims-related servicing becomes incorporated into policy structures:
- will strata management businesses still increase management fees to maintain margins?
- could claims-related fees increase over time?
- would higher claims servicing costs ultimately increase the perceived risk profile of a policy?
- how much will insurers increase premiums to account for that additional risk and servicing exposure?
I do not think there is a perfect answer yet.
But these are the questions the industry will need to address if it moves toward a model that relies more heavily on policy risk and claims-based servicing.
The future of strata insurance transparency in Victoria
The discussion surrounding insurance commissions reflects a broader shift toward greater transparency, disclosure and accountability across the Victorian strata sector.
What remains clear is that the work involved in managing insurance obligations does not disappear simply because commission structures change.
Claims management, compliance oversight and insurance administration all require significant professional expertise and ongoing involvement from strata managers.
To me, the real question is not whether commissions should exist.
It is whether OCs are better served by embedded commissions or by a model tied more closely to policy risk.
If transparency is the goal, owners should be able to clearly see whether they are paying for commissions, policy risk or actual professional work performed.
