Strata Insurance Commissions Banned: What the Fee-for-Service Model Means for Your Fees

The insurance renewal came through in February. Same building, same broker, same insurer as last year. But this time, the documentation was different. Where previous years had shown a single premium figure with nothing beyond it, the new invoice showed the premium - and then, separately, a "strata management insurance services fee" of $1,400. The committee treasurer asked the obvious question: was this fee new, or had it always existed, just hidden somewhere in the premium they'd been paying?

The answer was the second one. The $1,400 had effectively always been there, embedded as a commission paid by the insurer to the strata manager. What changed on 1 January 2026 was that it became visible.

This is the reality of the NSW strata insurance commission reform - and understanding the difference between transparency and saving money is essential for any body corporate trying to assess whether the changes actually benefit them.

How the Old System Worked

For decades, a common practice in the strata management industry was for managers to receive a commission from insurers when they arranged a body corporate's insurance policy. These commissions - often referred to as "volume bonuses", "referral fees", or simply "commissions" - were typically calculated as a percentage of the annual premium.

The percentages varied but were commonly in the range of 10% to 20% of the premium. On a building with a $150,000 annual insurance premium, that represented a payment to the strata manager of $15,000 to $30,000. Not disclosed to the body corporate. Not appearing in any invoice or management agreement. Effectively invisible.

The commission created an obvious structural problem: the person responsible for shopping around for the best insurance deal on behalf of the body corporate had a financial incentive to choose the insurer that paid the highest commission, rather than the one with the best coverage at the best price. Whether individual strata managers acted on this incentive or not, the conflict existed - and owners had no way of knowing.

This wasn't a secret in the industry. It was an open practice. The reform was driven by a recognition that it was fundamentally incompatible with a manager's duty to act in the interests of the body corporate.

What Changed on 1 January 2026

Following a review by the Strata Community Association (SCA) and regulatory changes implemented through the NSW strata management framework, strata managers in NSW are now required to:

Disclose all remuneration received from third parties in connection with services provided to a body corporate, including insurance arrangements
Obtain informed consent from the body corporate before receiving any such payment
Transition to a fee-for-service model where their remuneration for insurance-related services is paid directly by the body corporate as an itemised, disclosed fee - rather than as a hidden commission from the insurer

In practice, this means that strata managers can still be compensated for the time and expertise they apply to arranging insurance. What they can no longer do is take that payment invisibly from the insurer without the body corporate's knowledge and consent.

The reform applies in NSW. Other states have varying frameworks:

ACT: Has had disclosure requirements in place that predated the NSW changes
VIC: Has its own strata management licensing requirements, with disclosure obligations that differ from NSW
QLD: Body corporate managers have disclosure obligations under Queensland legislation, though the specific commission structure differs
WA, SA, TAS, NT: Requirements vary; the NSW reform is the most comprehensive to date

If you're outside NSW, the practical implications depend on your state's specific rules - but the trend is toward greater transparency nationally.

Will Your Body Corporate Fees Actually Go Down?

This is the question most owners are asking, and the honest answer is: possibly, but not automatically.

The reform requires transparency, not a reduction in what strata managers earn from insurance-related work. A manager who was previously receiving a $15,000 commission from the insurer can now legitimately charge the body corporate a disclosed fee for insurance services. If that fee is $15,000, the total cost to the body corporate is effectively unchanged - it's just visible now.

Whether fees actually decrease depends on several factors:

Competition and market pressure. Where body corporates use the transparency to compare what managers are charging for insurance services against alternatives, there is downward pressure on fees. A manager charging $18,000 for insurance services that the market values at $8,000 now has a problem that didn't previously exist - because the number is visible.

The three-quote requirement. NSW strata management legislation has long required managers to obtain multiple insurance quotes in most circumstances. With fees now visible, body corporates can more easily evaluate whether the insurance they're being placed with is genuinely competitive, and whether the management fee for the service reflects the work involved.

Whether your manager restructured or just shifted the cost. Some managers have genuinely restructured their fee arrangements, reducing insurance premiums and charging lower disclosed service fees. Others have simply made the existing commission visible and called it a fee. Reading your documentation carefully - and asking directly - is essential.

What to Look For in Your Next Insurance Renewal

When your body corporate's next insurance renewal comes through, look for:

Separate line items. The insurance premium and any management/brokerage service fee should now appear as separate figures. If they're still combined into a single number with no breakdown, ask for the itemisation.

Year-on-year comparison. Compare the total cost (premium + service fee) with last year's total. If the total has increased while coverage has stayed the same, ask why.

The three-quote requirement. Ask whether alternative insurers were approached and what the alternatives were. You're entitled to this information.

The fee disclosure document. Your strata manager should be providing a formal disclosure of any remuneration they receive in connection with the insurance - this is now a compliance requirement in NSW. If you haven't seen one, request it.

Questions to Ask Your Strata Manager

The reform creates an opportunity for body corporate committees to have a more informed conversation about insurance costs. Useful questions include:

What was the commission or bonus we were paying previously, and what is the disclosed service fee now? If the manager is reluctant to answer directly, that's informative.
How many insurers did you approach for this renewal? And can we see the comparison?
Is the service fee negotiable? Now that it's visible, it's also negotiable in a way that a hidden commission was not.
Are there any other commissions or referral fees you receive from service providers you've recommended to us? Insurance is the most prominent example, but the principle extends to contractors, maintenance providers, and other suppliers.
What do you actually do for the insurance service fee? Preparing a risk profile, briefing multiple insurers, comparing quotes, and managing the renewal process is legitimate work. Forwarding a form to one insurer annually is not worth a percentage of the premium.

The Broader Principle

The insurance commission reform is part of a wider push toward transparency in strata management remuneration. The same logic applies to contractor referrals, maintenance provider relationships, and other situations where a strata manager's financial interests may not be perfectly aligned with the body corporate's.

If you haven't reviewed your strata management agreement recently, it's worth doing. Look at what the manager is entitled to receive, from whom, and whether those entitlements are disclosed to the body corporate in a way that allows for meaningful oversight.

For most owners, the most practical change from the NSW reform is simple: your insurance documentation should now tell you more than it used to. Use that information.

Key Takeaways

NSW strata managers can no longer receive undisclosed insurance commissions from insurers. From 1 January 2026, all remuneration must be disclosed and consented to by the body corporate.
The fee-for-service model replaces commissions with disclosed charges paid directly by the body corporate - the total cost may or may not change, but it is now visible.
Fees won't automatically decrease - transparency is the reform, not a mandated reduction. Whether your costs fall depends on how your manager has structured the transition and whether the body corporate shops around.
Ask for itemised documentation at your next insurance renewal: premium and service fee as separate line items, the comparison of quotes obtained, and the formal remuneration disclosure.
Other states have varying rules - NSW is the most advanced, but disclosure requirements exist in ACT and to varying degrees elsewhere.
The same principle applies beyond insurance - commissions from contractors and other suppliers should be disclosed and scrutinised.

Insurance and fees:

Management transparency:

Compare body corporate fees across Australia at BodyCorporateFees.com.

This article is for informational purposes only and does not constitute legal or financial advice. Strata management remuneration disclosure requirements vary by state and territory and are subject to change. For advice specific to your body corporate's situation, consult a licensed strata manager or strata lawyer in your state.