Natural and man-made catastrophes are becoming common place. Whether as a result of climate change, unsafe work practices or simply a desire to get someone else to pay for our own misfortunes – the cost of insuring ourselves and our property is climbing at an exponential rate. In some areas of Australia, strata insurance costs have literally ‘gone through the roof’!
The strata insurance in place for your owners corporation or previously known as body corporate, must meet the legislative requirements (Sections 59 & 60 of the OC Act 2006) insofar as it must take out reinstatement and replacement insurance for all buildings on common property and also public liability insurance. It may also include coverage for the performance of functions – i.e. Machinery Breakdown and Office Bearer’s Liability are two such additional risk areas. Owners are also encouraged to have their own Contents Insurance for their personal property located in their lot. Landlord’s Contents Insurance is another insurance product for owners who rent out their property. It’s a huge industry but one that has suffered dramatically in recent times.
Victorian Residential Strata Insurance currently has an industry loss ratio of 75-77% on average. This high loss ratio has meant some insurers have either pulled out of the market and/or have restricted their premium base to the lower building valuation sector. We are increasingly faced with both an availability problem and an affordability problem.
A recent study of the claims history of a typical large strata further revealed that almost 95% of claims are under $5,000 which means that on renewal, a building’s Excess is rising 12-20% in some cases. Furthermore the Victorian Government had intended to remove the Fire Service Levy this year but have pulled back from that relief creating a further 18-28% increase in this cost sector.
However, all is not lost – through MICM Property in-house insurance consultant (City Central Insurance) we have been able to keep renewal premiums to 10% on average based on claims history. That’s the good news and hopefully goes some way in ‘keeping the lid on’ this vital building cost!
Dorothy F. LeClaire
Manager, Owners Corporation Managers