One of the country's most high-profile strata management firms has been using its wholly owned insurance arm to charge apartment owners insurance brokerage fees as high as three times the typical rate.
Netstrata is the naming rights sponsor of Jubilee Stadium, home of the St George Illawarra Dragons, and its managing director is Stephen Brell, the NSW president of the Strata Community Association . "They are moving into areas of service provision, which is designed to do nothing more than capture owners corporations into a position where they are literally being milked.A former senior strata manager at Netstrata, Nina Howell, is speaking out for the first time to call for reform."There needs to be a lot more transparency and there needs to be a lot more accountability.
While typical industry practice is for brokers to charge about 20 per cent for brokerage, the ABC has confirmed that on at least two occasions Netstrata's subsidiary has charged 60 per cent or higher. Asked whether a 64 per cent brokerage fee was "reasonable in any circumstances", Mr Brell said: "It would depend on the work that's been performed."Asked about her reaction to the fee, she said: "I was just shocked, to be honest."The Jacksons subsequently obtained a quote from an independent broker. It came in at one-third the price.
Bob Harris, who was a senior executive at Netstrata until 2009, told ABC Investigations that Netstrata had become "very much more interested in money than with providing service to the actual owners corporations".It was able to charge exorbitant fees, he said, because many apartment owners did not pay close attention to the conduct of the company and lacked experience reading financial reports.
In 2019, its average fee was 31 per cent of the premium, in 2017 it was 46 per cent, and in 2015 Netstrata's average brokerage fee charged to its clients was 48 per cent.Highest of all was 2016, when Netstrata's average "net brokerage fee" on the insurance arranged for its owners was 52 per cent. The company's financial returns show that since 2015, Netstrata has banked more than $21 million in brokerage fees, helping to generate profits over that period totalling almost $50 million.The 2022 industry report — an Independent Review of Strata Insurance Practices, by insurance expert John Trowbridge — identified systemic problems with "black box" insurance arrangements that raise "questions of appropriateness".
Ms Howell, who sued Netstrata for unfair dismissal two years ago and agreed a confidential settlement, said these incentives were not reported to owners. The ABC has confirmed that in at least one case, the company's deal with a supplier was a 7.5 per cent commission on fees it's paid by Netstrata's clients.
"I appreciate that because they're not listed in the ledger for the owners, that report is incomplete," he said. The company is owned and run by relatives of one of Netstrata's most senior executives, Jeremy Stone. "I believe the regulators have failed to comprehensively address disclosures of pecuniary interests at all levels," he said.
Having examined a recent Netstrata financial report to one scheme, Mr Harris agreed the fees, "don't appear to be disclosed".