Steadfast rejects ABC claims that it misled customers

9:13am on 10 September 2024

The news: Steadfast has refuted allegations made by the ABC, after the national broadcaster claimed that Australia's largest strata insurance broker was "caught misleading its clients".

The context: Steadfast said it was "disappointed that important information has been selectively presented" in the article, which was published on Monday and followed a Four Corners investigation into the company.

Steadfast said it provided the ABC with information on 29 August and 4 September which was not included in the coverage.

It noted that there was "no mention of the fact that Steadfast commissioned respected insurance expert John Trowbridge to conduct an independent review in late 2021" to "help identify how remuneration, transparency and disclosure practices can be improved for the benefit of customers and industry participants".

Steadfast said that final Trowbridge report was published in May last year and was available to the ABC.

The company said it is "fully committed to a transparent and competitive marketplace that delivers the best value to customers". It noted that all of its businesses, including brokerages and underwriting agencies, operate independently and actively compete with each other.

Steadfast also rejected the ABC's allegation that its brokers are "misleading" customers, and defended the actions of its brokerage business Body Corporate Brokers, which the ABC said had been caught "burying an offer of cheaper insurance" by rival underwriter Strata Community Insurance in favour of a quote by another Steadfast-owned company CHU.

Steadfast saw its shares tumble 6.1% on Monday after the ABC article was published, before entering a trading halt on the ASX pending a formal response.

What they said: "Steadfast is naturally concerned about any case that may fall short of our standards and expectations," said Steadfast managing director and CEO Robert Kelly.

"Should instances be raised that require further action, we will of course investigate and act to rectify any shortfalls in our processes and procedures," he said.

12:02pm on 10 September 2024

More news: Steadfast shares dived after emerging from a trading halt on the ASX, as the insurance broker rejected allegations by the ABC that it misled customers.

Shares were down 11.2% to $5.30 by midday AEST, having lowered 6.1% on Monday before entering a trading halt.

Goldman Sachs analysts said they "do not take a view on the substance of the allegations or the potential regulatory outcome".

However, they noted that the ABC article said the Australian Competition and Consumer Commission (ACCC) is calling for a ban of strata commissions and the need for mandatory mergers and acquisitions (M&A) notification requirements.

The analysts said that if general insurance commissions were to be banned, there would be a shift to alternative fee arrangements, noting that around 13% of Steadfast's Australia gross written premium related to strata insurance.

They flagged that the ACCC comments suggested some risk around M&A, particularly in view of new ACCC powers being considered by the government on creeping acquisitions. Offshore opportunities may become more meaningful as a result, they said.

Meanwhile, Macquarie analysts said that growing media and regulatory attention posed an "unquantifiable challenge" to valuation, which would "remain a watch point" over coming months.

They said that proposed disclosure changes are unlikely to impact Steadfast's earnings, but reputational damage could pose potential implications for the capital pipeline.

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