Steadfast faces scrutiny amid strata insurance scandal

Steadfast Group, the largest strata insurance broker in Australia, is facing scrutiny for allegedly misleading customers by not disclosing more affordable insurance options from competitors.

The Australian Competition and Consumer Commission (ACCC) has now called for a ban on commissions in the strata insurance market, citing concerns about undisclosed payments that may be inflating costs for apartment owners.

An investigation by the ABC’s Four Corners program found that Steadfast, which manages 40% of the nation’s strata insurance brokering and writes 55% of strata policies, recommended a higher-cost policy from its own subsidiary, while withholding a cheaper offer from a competing underwriter.

The revelations have raised questions about the transparency of Steadfast’s operations and its influence in the market.

The investigation also uncovered that Steadfast had been involved in arrangements where insurance commissions were funnelled to strata management firms, without disclosure to the apartment owners ultimately paying the bill.

Steadfast’s CEO, Robert Kelly, admitted that many apartment owners were unaware of these deals, acknowledging a “gap” in their understanding.

ACCC Chair Gina Cass-Gottlieb (pictured) criticised these undisclosed commissions, saying they contributed to rising insurance premiums and created conflicts of interest.

“The receipt of hidden payments and commissions of whatever nature is misleading consumers,” she said, as reported by ABC.

She advocates for a full ban on such payments in the strata insurance sector, stating that greater transparency alone would not resolve the fundamental issue of financial incentives skewing recommendations.

“A solution that is about imposing … enhanced disclosure obligations doesn’t get to the root of the problem, which is the financial incentive,” Cass-Gottlieb said.

Steadfast has expanded significantly in the strata sector since it went public on the Australian Securities Exchange (ASX) in 2013, acquiring over $1.6 billion in assets, including insurance brokers and underwriters.

Its strata business now contributes more than 20% of its total profits, amounting to $43 million last year. Despite this, the ACCC claimed that it has rarely been notified of Steadfast’s mergers and acquisitions due to the voluntary nature of Australia’s merger reporting rules.

Cass-Gottlieb called for mandatory notification of mergers, citing Steadfast as an example of a company that has amassed considerable market power without sufficient regulatory oversight.

She noted that in the past decade, Steadfast had submitted fewer than five notifications to the ACCC, with only one filed in the last three years.

A recent case involving Steadfast’s subsidiary, Body Corporate Brokers (BCB), exemplified the concerns.

Earlier this year, BCB informed a strata building in Sydney’s lower north shore that only one underwriter, CHU – also owned by Steadfast – was willing to provide insurance. However, Strata Community Insurance (SCI), a competitor, had offered a cheaper policy that was not disclosed to the building’s owners.

ABC reported that SCI’s managing director, Paul Keating, denied that his company had withdrawn its offer, as BCB claimed. One of the apartment owners, Mark Swain, independently contacted SCI and received a quote that was $3,200 lower than the one recommended by BCB. When questioned, Steadfast did not produce documentation to support its claim that the SCI offer had been withdrawn.

The ACCC has expressed concern over Steadfast’s conduct in the case, with Cass-Gottlieb stating that the broker’s behaviour raised issues of misleading representation and a failure to prioritise customers’ best interests.

The controversy comes amid broader calls for reform in the strata insurance sector.

The ACIL has urged the government to initiate an inquiry into the sector to address these concerns and improve consumer protections.