The untapped community insurance market

Ria Furriel: Partner: Community insurance, King Price

Tony: Community insurance opportunities can have multiple benefits for brokers looking for new business. Please give us an overview from a King Price perspective.

Ria: The data speaks for itself. If we look at the stats from 2005 to 2020, sectional title ownership increased from 13%, on all property sells, up to a whopping 29%. And we foresee it increasing even more over the next five years.

There’s an added benefit of a broker being able to cross-sell other products to the residents if they have a close relationship with the body corporate and managing agent.

Tony: The risks faced by bodies corporate will obviously vary based on where they are. There must be some general risks that need to be covered no matter the location. Can you mention some of these risks and the cover you offer?

Ria: The community insurance industry is regulated by various acts. These acts list specific minimum requirements that the body corporate, or the board of trustees that represents the body corporate, needs to meet to ensure they comply. It includes the typical things that we’re used to in insurance, like storms, fires, water escape, the impact of vehicles and so on. But, it’s not only about making sure that the body corporate insures the physical structures, units or sections, it’s also about ensuring they’re covered for legal liability.

Fidelity cover was the biggest change when these acts were amended in 2016. In a nutshell, fidelity cover is where the body corporate is required to have sectional title insurance cover for fraud and dishonesty regarding the body corporate’s money. One of the legal requirements is that the managing agent needs to be included in the cover, which wasn’t a requirement before the amendment in 2016. 

The change flows from many instances where managing agents have stolen a body corporate’s trust money. If that happens, the body corporate doesn’t have the money to continue with the day-to-day admin responsibilities of paying what needs to be paid like electricity, sewage, waste removal, insurance, and maintenance. 

Tony: Where does damage to property fit into personal insurance? Does the body corporate’s insurance replace buildings insurance if someone lives in a sectional title scheme? 

Ria: Yes. When somebody asks me what’s insured under community insurance, I usually explain it like this: Take the roof off a unit, turn it upside down and shake it. Everything that stays intact is insured by the body corporate’s community insurance, and everything that falls out of the unit is for your personal insurance.

So, everything that you won’t take with you when you move out is insured under community insurance. 

Tony: It gives a lot of opportunity then for brokers. Where do brokers fit into community insurance? 

Ria: There’s a key role for brokers to play here, especially those that specialise in sectional title insurance. It’s crucial that brokers understand the specific sectional title requirements and regulations. It’s not the easiest insurance portfolio to understand. 

Besides the regulations, you’re also sitting with a lot of maintenance-related issues. King Price adds tremendous value in this area, with our award-winning platform, called, Felix, which unites everyone in the maintenance and claim value chain. Felix automates and speeds claims up, and this means that brokers don’t necessarily have to be involved with small day-to-day claims. 

Brokers also need to understand the politics within sectional titles and how the acts work, because our policies need to comply with these acts. 

There is a key role for brokers to play here, especially for brokers that specialise in sectional title insurance, which is crucial because there are a lot of regulations and requirements in sectional titles, and it’s not the easiest insurance portfolio to understand. There’s a saying in the industry ‘one castle with many kings.’ That’s how we describe sectional titles, because imagine if you have a piece of land where you have 300 units or sections making up the body corporate. There are a lot of opinions and suggestions at play. 

If the broker doesn’t understand the specific requirements outlined by the acts, it’s going to be difficult for them to explain it to a body corporate. They also have to make sure that their client’s policy addresses all their client’s needs.

We often find that bodies corporate are covered by a commercial policy and not a custom-made or specialised community insurance policy. There are certain covers and risks that need to be insured under community insurance. For example, when average is applicable under a commercial policy, average applies to the total sum insured. Under a sectional title policy, the average only applies to the affected unit or common property.