Obtaining strata insurance is not an easy process. The change from a soft market (lower premiums/multiple insurance options) to a hard market (higher premiums/fewer insurance options) has made obtaining insurance options a difficult task - especially where there have been ongoing issues with a strata ranging from building defects, to serial claimants for continual minor incidents.
We are currently toward the top of the insurance cycle, with at least 12-18 months of higher rates anticipated.So what can be done to ensure a more favourable insurance renewal?
Implement a Proactive Maintenance Plan
The Strata Title Amendments Act (effective May 1st 2020), introduced a 10 year maintenance plan - a compulsory requirement for strata buildings with 10+ lots or building replacement cost of $5,000,000+.
The main purpose of the maintenance plan is to prevent levies being raised for unexpected high repair/replacement of cost items, the positive flow on is that the strata will take a proactive approach in preventing future insurance claims. Water damage is the most common type of strata claim made and pre-emptive maintenance via qualified inspection of roof flashing, water pipes, valves and flexi hoses can help prevent claims in this area.
We've seen so many strata's (especially older) with multiple building defects having difficulties even finding insurance - working together with your broker and strata manager to implement a proactive maintenance plan will only help you in the long term.
ADAPT TIPS - Do not consider your insurance policy as the maintenance plan and seek advice from your insurance service provider first on whether a claim should even be made, try and avoid needless/small (around excess cost) claims where possible.
Adequate Fire Protection
Ensuring the strata has adequate fire protection is one of the fist things insurers look at. Below is a summary of what fire protection insurers need to see installed at a medium/large strata complex:
- A strong recommendation would be to install monitored smoke detection throughout the entire premises, with a direct link to the fire brigade.
- Also ensure other fire protection is in place such as extinguishers, thermal detectors, hydrants, and hose reels where possible.
- Obtain flow tests, block plans and ensure testing of all systems is carried out and documented.
Hydrant flow testing should be carried out at least annually, with any reports being passed onto your insurance service provider.
- Where Commercial cooking risks (restaurants) have a kitchen/gas connection on site, it is recommended to install a gas shut off valve to reduce the size of a potential loss should a fire occur at this point – fire blankets and extinguishers are also a must.
- Ensure such Commercial tenants carry out professional cleaning of filter, flues and grease traps.
Aluminium Composite Cladding (ACP)
There has been a lot of coverage on the dangers of ACP, a material that is slowly being phased out across the property industry.
Insurers are reluctant to offer insurance where high percentages of ACP is fitted to strata and may require removal of this material before offering insurance at all. The below table provides a general overview on how insurers rate ACP combustibility, however as this list is everchanging it should only be used as a guide.
If you are unsure of whether your Strata has flammable cladding, you can contact the Department of Mines, Industry Regulation and Safety (DMIRS) to confirm this as they have carried out a State wide audit of at risk Strata
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