The Strata Insurance Market is a complex environment. Insurers have been dealt a significant blow in recent years by the Queensland and NSW Floods, with approximately $5.74b in claims made. Insurers are taking decisive action to recoup losses from natural disasters and other claims, such as raising premiums or deductibles, minimising higher-risk plans, and strictly adhering to policy conditions.
With the tightening market, insurers are choosing what risks they take on if any. Whilst it is required that Strata Schemes must have insurance in accordance with the legislation, it is not compulsory for insurers to provide a policy. It is becoming common that some buildings are left with reduced terms or no insurance. Without insurance protection, all risks fall on the individual owners jointly and severally.
In the Spotlight
Building defects can have serious repercussions, including increased premiums, higher excesses, and policy exclusions. In severe cases, buildings with issues where no meaningful action is being taken may even become uninsurable. Timely rectifications are critical to insurers who will not accept delays.
Outstanding Work Health & Safety (WHS) Items
Ignoring or delaying action on WHS items will lead to being classified as an additional risk. Hazards should be taken care of as soon as possible. Insurers need to see evidence that action has been taken or that there is a plan for rectification; a lack of action could result in policy restrictions, penalties, or even denial of a claim. Take swift measures and ensure everyone’s safety.
Outstanding Fire Compliance Orders
Unless action is taken, a plan may be deemed “High-Risk”. Insurers are unwilling to accept any delays in rectifying the situation. High-risk items should be addressed as a priority for the safety of everyone in the building. Policy conditions may be enforced to ensure compliance to ensure renewals are not affected; all outstanding Fire Orders must be actioned promptly.
Despite other possible solutions, in NSW, Project Remediate is still the ideal choice, as insurance companies will continue to provide coverage. The insurance market for buildings with even safe forms of cladding is extremely limited and comes at a high cost.
Insurance providers often request a five-year claims history when ascertaining a risk profile. The frequency of these claims is considered in relation to systemic issues that may point to inadequate maintenance or other preventative care; if there is a repeated issue, resolve it before it gets out of hand.
Stay Ahead of the Game and Read the Signs
Even well-maintained properties with ‘clean’ claims histories and a lack of issues are seeing premium increases of up to 30%, with costs going even higher for complex buildings. If short-term policies are also issued with conditions, cover may be denied altogether if not met.
So take proactive measures to stay ahead of the game by addressing any potential issues before renewal time. Working with your Strata Manager can help facilitate strategies that swiftly address any Defects or WHS matters before they become more significant issues and create substantial insurance risks when it comes time for renewal to put yourself in the best possible position.
Things to take away –
- Building defects can have severe repercussions for Owners Corporations if not addressed promptly.
- WHS items should be taken care of immediately.
- Fire Orders must be carried out without delay.
- Remove any other risk that may cause you an issue.