How to speak strata insurance like a native

This week we introduce a new voice to Flat Chat. Our old friend Francesco Andreone, former strata lawyer, now consultant, has his own website which produces a couple of insightful essays on strata living every week. You can sign up for subscription-based website GoStrata, here and you’ll find an email address if you want to ask questions at the end of this article.  Meanwhile enjoy this free sample of his informed and instructive articles.

Sometimes the English language is confusing because special words are used that do not have their natural or an obvious meaning. 

And strata title insurance is a perfect example where most stakeholders speak colloquial insurance or strata speak whilst the relevant laws, rules, insurance players, and regulators speak in a more formal language with special meanings that are confusing.

So, here’s a short lesson in strata title insurance English for beginners covering some of the more commonly misunderstood terms.

And, hopefully by the end you’ll better understand and use strata title insurance language.

A STRATA INSURANCE LANGUAGE LESSON

A Financial Product

A Financial Product is a facility through which, or through the acquisition of which, a person makes a financial investment, manages financial risk or makes non-cash payments.  Financial Products are regulated in Australia.

Typically, that’s understood to mean investments, loans, shares, etc.  But, because insurance is used to manage financial exposures from risks, it also fits that definition.

So, strata title insurance is a Financial Product.

General Insurance

General Insurance refers to a very broad category of insurance that covers the loss of or damage to valuable property [like buildings, vehicles and other items], liability to other people or organisations [like public liability, professional responsibility, or workers compensation] and for financial losses.

So, strata title insurance is General Insurance.

Retail Client

A Retail Client is anyone who isn’t a Wholesale Client.  That’s everyone except:

• someone who’s buying a Financial Product with a value of $500,000 or more,
• someone with more than $2.5 million in net assets,
• professional investors [mostly institutional investors and investment managers]
• sophisticated investors [certified by an Australian Financial Services Licence holder
• large businesses with more than 20 employees [or more than 100 employees if it is a manufacturer].

Retail Clients of Financial Products have special protections and rights.

So, strata buildings and strata owners would be Retail Clients for strata title insurance.

Except that state strata laws exclude strata buildings from the operation of the Corporations Act 2001 which is the national law that creates many insurance consumer protections like those for Retail Clients.  A NSW example is section 8(2) of the Strata Schemes Management Act 2015.

Personal Advice

Personal Advice about a Financial Product is differentiated from General Advice and Factual Information.

Personal Advice is given when the advice about a Financial Product covers one or more of the client’s objectives, financial situation, and needs, or a reasonable person would expect the person giving the advice to have considered those matters.  It’s a little vague and sometimes hard to be sure about it.  Plus, there’s ways Intermediaries can disclaim that they’re giving Personal Advice which complicates it further.

Where Personal Advice is given there are extra obligations to protect the Retail Client’s interests.

So, a proposal for strata title insurance coverage could well be Personal Advice when its tailored to the strata buildings objectives, situation, and risk coverage needs.

Intermediary [or Intermediaries]

An Intermediary is a person or organisation that acts as a middleman between two parties to facilitate a Financial Product transaction. Typically that’s banks, mutual and other investment funds, superannuation funds, insurers, etc.

But it also includes insurance brokers and authorised insurance agents.

So, everyone involved between the insurer and strata buildings [like underwriters, brokers, strata managers, etc] is a strata title insurance Intermediary.

Conflicted Remuneration

Conflicted Remuneration is a funny [or odd] phrase in the strata title insurance vocabulary because it is negatively expressed [ie: the remuneration is received as a result of a conflict of interest] it is allowed.

Conflicted Remuneration refers to money and other benefits given by the suppliers of Financial Products to Intermediaries that might influence the advice they give about or the Financial Products they recommend to a Retail or Wholesale Client. It typically refers to things like rebates, volume bonuses and insurance commissions. 

But there is an exemption that allows for the payment of Conflicted Remuneration related to a General Insurance Financial Product like strata insurance.

So, whilst strata tittle insurance commission is Conflicted Remuneration, it is legally permitted because strata title insurance is General Insurance.

CONCLUSIONS

It’s important to understand what’s being said to you and what you’re saying when discussing, selling or buying strata title insurance.

This short beginner’s lesson will help you understand strata title insurance jargon a bit better.

So, let’s all strata insurance speak properly from now onwards.

You can go directly to GoStrata via these links:

www.gostrata.com.au 

https://gostrata.substack.com

and here’s the email address support@gostrata.com.au