Understanding Commission in Strata Insurance

When purchasing strata insurance, you may wonder how Brokers or Strata Managers acting as Authorised Representatives earn compensation for their role in supporting or arranging your policy. At CHU, we believe clarity is crucial, so owners fully understand the process and available options.

Who is involved in arranging strata insurance?

Insurance Broker

These licensed professionals act for the insured and provide general or personal insurance advice.

Request quotes from different insurers and can provide a recommendation.
Arrange and manage your policy.
Support you through the claims process.

A Strata Manager acting as an Authorised Representative (AR)

These licensed professionals can work on behalf of an insurance provider and act for the insurer, or work on behalf of a Broker and act for the insured.

They provide up to general insurance advice. For insurance, they may receive a payment from the underwriting agency for the service and expertise they contribute to the arranging and placement of the Body Corporate (BC) insurance. Including tasks such as:

Help you arrange and manage your policy.
Support you through the claims process and policy life cycle.
Quotation, procurement, placement and renewal services.
Insurance valuation services incl obtaining valuation and distributing information.
Insurance advice services referring to an adviser, providing certificates of currency.
Insurer negotiation and liaison services: managing claim decline negotiation, negotiations on premiums, liaising with legal, managing documentation.
Insurance finance service: arranging loans or funding if required.

If your Strata Manager is conducting the above tasks, then they must have their own Financial Services Licence or be an Authorised Representative of a company that does have a Financial Services Licence.

If your Strata Manager is not an Authorised Representative (AR), then they are not able to help the Body Corporate (BC) with the above tasks. The BC must do it completely themselves or engage a Broker.

You may wonder what it means if your Strata Manager tables insurance documents at the Annual General Meeting (AGM), or helps you with tasks such as:

Insurance claim services: lodgement, claim management, managing communications with insurer, loss adjuster and contractors, managing and filing paperwork, managing finance of claim.
Insurance record keeping services: maintaining client insurance records, managing claim register.

This work does not require the Strata Manager to be an Authorised Representative.

The role of the Body Corporate

The Body Corporate is the legal policyholder and is responsible for insurance. Its role includes:

Decide which insurer and policy to purchase, based on options presented by Broker or AR (if one is used)
Identify any lot property that falls within the BC duty to insure, in addition to the common property
Identify what falls within BC duty to insure, and what falls to individual lot owners, in order that lot owners can obtain appropriate insurance
Create and maintain a list of the lot occupants and lot uses
Create and maintain a common property asset and improvements register
Determine the level of excess in relation to premium for any insurance obtained
Compile and disclose information to the insurer that may affect the decision, and terms, to insure the property
Determine the replacement value of the insured property
Know if, and how often, the BC has a legal requirement to obtain a property valuation
Know what assets are mandatory and optional to insure. Consider obtaining advice on the potential risks of optional assets
Know if public liability insurance is mandatory and what the minimum coverage is
Know if the BC engages any works that would fall under workers compensation legislation
Ensure all necessary insurance cover is in place, adequate, and renewed on time. Including reading the insurance policy documentation
Disclose insurance information to lot owners
Approve the renewal or placement of insurance, and any resolutions related to insurance, at committee or general meetings
Authorise payment of premiums and fees from the BC funds (collected through levies)

How do you pay for these services?

The Broker or AR may be paid by:

Commission

A fee from the Body Corporate

A mixture of commission, and fee paid by the Body Corporate.

What is commission?

This is a percentage included in your insurance base premium. To make it clearer, consider this example: on a $10,000 premium with a 15% commission, $1,500 goes to the Broker or AR. The commission is one of the factors insurers use when setting the premium price. It compensates the companies involved in arranging and placing insurance for the work and expertise they provide over the policy life cycle.

How does commission work?

Broker: The insurance provider will pay the commission to the broker.

AR: If there’s no Broker involved, some Strata Managers acting as an Authorised Representative (AR) of the insurer may receive commission directly from the insurer or underwriting agency for the knowledge, information and services they provide over the policy lifecycle to place and service the policy.

Broker and AR involved:

Both the Broker and AR are acting on behalf of the BC.

The Broker may choose to receive a commission from the insurance provider and in turn pay some or all of this to the AR, again for the services provided over the policy life cycle.
An AR may receive a portion of the Broker commission or fee (sometimes called a share or rebate), depending on the agreement they have with the BC

If this happens
The Broker and the AR must disclose any commissions or fees they are receiving to the BC so it’s clear who is being paid and how much.

AR compensation may be a commission paid to them by the Broker or underwriting agency, or a share of the Broker fee. If the AR chooses not to be paid by the Broker or Underwriting Agency, they may bill the BC directly to compensate them for the work done over the life cycle of the insurance policy depending on business models and contractual terms and conditions arrangements.

Who sets the commission amount?

The insurance provider determines the commission percentage that is built into the insurance premium
That commission rate is typically standard for each product class, such as strata insurance, and is part of the insurer’s costs of distribution and overall service provided by underwriting agencies and Broke
The rate is disclosed in the underwriting agency or Brokers Financial Services Guide (FSG) and shown on renewal and new business quote documentation

Can Brokers or Authorised Representatives change the commission amount?

No, not directly. They don’t set the commission percentage — it’s set by the insurer or underwriting agency. They can decide to take less commission than the insurer or underwriting agency is offering them. This includes ‘net terms’ where the insurer or underwriting agency pay no commission.

What needs to be disclosed?

In Australia, there is a very clear duty for commissions to be disclosed under Section 20B of the Insurance Contracts Act 1984 (Cth).

Both Brokers and ARs have a duty to inform the BC of how they are remunerated (commission, fees, or both).

What about fees instead of commission?

Not all Brokers or Authorised Representatives use commissions. Some charge a separate professional fee—a direct payment for their service, separate from the insurance premium.

To support this, CHU offers what’s called net-rated quoting. This removes commission from the premium, so your Broker or Authorised Representative charges you a fee instead.

Why does CHU provide both options?

Every strata community is different, and so is every professional relationship. That’s why CHU offers both commission-based and net rated quotes.

If commission is preferred as part of the premium, that option remains available
If payment of a fee by the BC to the Broker or AR is preferred, this option is also offered by CHU. This can be discussed with the Broker or AR.

To ensure transparency and informed decision-making, consider adding commission and fee information to your next Annual General Meeting agenda. This simple step can help owners stay informed about how fees and commissions are structured, enabling more effective discussions and decisions regarding insurance arrangements.

Recently, I have seen a lot of information about the Strata Community Association (SCA) NSW banning commissions. What happened, and what does it mean?

SCA NSW has announced a voluntary reform initiative on insurance commissions, not a mandatory ban
From 1 January 2026, SCA NSW members will be encouraged to begin a phased transition to a fee-for-service model to replace the commissions on insurance model
This is voluntary for SCA NSW members, and existing contracts that include commissions can continue

Our role as an Underwriting agency

CHU doesn't decide how your Broker or AR charges for their service. Our role is to ensure that the cost of arranging or coordinating insurance is available in a manner that works best for you and the professionals you engage.

Whether through commission or net rated quotes, our focus remains the same: helping strata communities access quality insurance and support when they need it most.

Source for roles of Strata Managers and Bodies Corporate:

Johnston, Nicole. A Data-Driven Holistic Understanding of Strata Insurance in Australia and New Zealand. Deakin University, June 2021.