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Insight

Commercial Strata - The occupants determine the risk

By Lia de Sousa on

When applying for or renewing your clients’ commercial strata insurance policy, it is imperative you help us provide as much information to the insurer as possible.

Lia de Sousa, Whitbread’s General Manager | Strata explains how providing detailed information about a property, can result in a more accurate insurance risk rating, and fairer insurance premiums that truly reflect the risk profiles of the buildings you manage.

Strata Insurance – a compulsory policy – provides general insurance cover for the strata building, shared or ‘common’ areas, common property and common contents – basically anything your and their neighbours own collectively.

In the course of arranging Strata Insurance, we often see commercial strata properties occupied with wildly varying business activities. These can range from accountants, bakers, tattoo parlours, fast food restaurants, or cabinet makers – just to name a few. 

As you may already know, some business activities are considered more risky by insurers than others, e.g. an office is a low risk business activity, and a fireworks factory is a high risk business activity.

Lia has revealed that a very common problem brokers face when arranging insurance for commercial strata properties is the lack of information provided. 

“We often find ourselves in the situation where there are large gaps in the information we need to supply to the insurance companies - particularly regarding the exact business activities carried out in each lot. Unfortunately if information is incomplete or inaccurate it can affect the insurance premium, policy excesses and sometimes acceptance of insurance claims.” 

How can more information help your clients?

As an insurance broker, it is our responsibility to present your clients’ property risks to insurers as accurately as possible.

Essentially, the more extensive the property information, the more accuracy with which the insurer is able to rate the risk, and apply correct premiums and policy excesses.

Different insurance companies have varying risk preferences. Knowing as much as possible about the property allows us to approach the right insurers best suited to protecting your clients’ risks.

What information do insurers use to rate commercial strata property risks? 

While this will vary slightly between different insurance companies, we have included a list below of the information generally required by commercial strata property insurers:

  • Occupants business activities
  • Building location
  • Building materials and age of building
  • Security systems in place
  • Fire protection measures
  • Building facilities e.g. lifts, escalators, pools
  • Insurance claims history 

What happens if there are information gaps on business activities?

  1. High premiums and excesses
    If little is known about the business activities of each occupant, an insurer will likely still insure your client’s risk, however they may rate the risk using a “Worst Case Scenario” mentality.

    What does this mean?
    If there is a lack of information, insurance companies will generally rate property risks poorly, applying much higher premium rates and excesses than they would if they knew the business activities of tenants, and were able to accurately assess the risk.

    In the case of the unknown, insurers need to protect their own financial interests, assuming the “worst” when it comes to premium loading.

  2. Claims issues or policy cancellation
    If cover is placed with an insurer based on missing or incorrect business activity details, and the correct business activities come to light, this has the potential to negatively impact claims made on the insurance policy, and can even prompt insurers to cancel policies in full.

A solution

As an OC Manager we know your days are incredibly busy, and that gathering the often complex information required for insurance purposes can feel like an impossible task.

As your insurance broker, we are always prepared to assist in background work to gather the information required to place insurance for your clients. However we do on occasion need your help!

In instances where you don’t have the various occupant details on your files, please speak with us so we can help overcome this issue.

Below we have included some solutions to consider:

  1. Site Contacts - Providing us with a contact at the property, or putting us in touch with the managing agent may be able to assist us in obtaining the information required.
  2. Property Surveys - Providing us with a contact at the property who is happy to take us around the site and perform a survey will help us gain an accurate picture of the risk.
  3. Contacting Owners - Sending a letter / email to all the unit owners / Chairperson / committee can help in gathering the information required.


If you need any further information or guidance, particularly if you would like to arrange a property survey, please contact your Whitbread Account Manager.

T | 1300 424 627
E | info@whitbread.com.au

 

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This insight article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice.  Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 Licence Number: 229092 trading as Whitbread Insurance Brokers for further information or refer to our website.

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