PICA Group calls for balanced reform in insurance remuneration Sydney NSW

PICA Group, one of Australia’s leading strata management companies, has issued a strong statement urging a balanced and transparent approach to reforming insurance remuneration practices in the strata sector.

In response to proposals advocating the removal of insurer-paid commissions to strata managers in NSW, PICA Group warns that such a move would shift costs estimated at $100 – $150 million annually onto consumers potentially undermining affordability and service quality.

‘Removing insurer payments without a sustainable replacement mechanism risks increasing costs for owners and destabilising the strata management sector,’ said Bobby Lehane, Managing Director and CEO. ‘We support reform, but it must be fair, transparent, and economically viable for all parties; the consumer, the insurers, the broker and the strata managing agents.’

PICA Group raised concerns with the newly adopted SCA NSW position. The policy proposes passing insurance costs on to the consumer in the form of a fee. This may effectively create a net market model, a practice where insurance products are priced without commissions meaning the cost of adviser or distributor remuneration is separated from the product itself.

PICA Group argues that in a net market, insurers are likely to retain windfall gains rather than transfer full savings to consumers. Any initial savings consumers might experience are likely to be short-lived, as insurers will inevitably optimise profitability. Indeed there is no clear evidence in Australia that banning commissions has led to sustainably lower premiums across broad insurance markets, as external factors such as rising cost of claims have a much greater impact on premiums than commissions.

To address concerns regarding transparency, conflicts of interest, and to better align with fiduciary obligations, PICA Group proposes a fixed fee model. It would be funded by insurers and adjusted to the consumer price index (CPI), replacing commission-based payments.

Additionally, PICA Group emphasises that owners should be given the choice to pay an equivalent fee directly, opting for no remuneration to strata managers from insurance parties should they wish.

‘Consumers should not bear the burden of insurer distribution costs,’ Lehane added. ‘Strata managers play a critical role in facilitating insurance coverage, and their contribution must also be recognised and sustainably funded.’

The company calls on industry stakeholders and regulators to consider a phased and thoughtful transition with well understood replacement mechanisms. They should protect consumers, support transparency, and ensure the continued viability of the strata management sector.

PICA Group urges all stakeholders including insurers, brokers, legislators, regulators, strata managers and consumer advocates to actively engage in shaping a fair and transparent insurance remuneration framework. Collaborative reform is essential to ensure the long-term viability of the strata management sector and to protect consumer interests.