House of Representatives Committees

House Standing Committee on Social Policy and Legal Affairs

Committee activities (inquiries and reports)

Inquiry into residential strata title insurance

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Terms of Reference

That the House of Representatives Standing Committee on Social Policy and Legal Affairs also inquire into and report on the affordability of residential strata title insurance, particularly in Northern Australia, and factors influencing this, including:

(a)	The magnitude of the increases in the cost of residential strata insurance over the past 5 years, the reasons for these increases and whether these increases are likely to be sustained;
(b)	The ability of insurers to price risk and the availability of accurate data to allow for this;
(c)	The extent to which there is a failure in the insurance market for residential strata properties either generally across Northern Australia or in some regions in particular, for example due to a lack of competition between insurers;
(d)	Whether consumer awareness of different insurance options should be enhanced;
(e)	The extent to which the nature of body corporate arrangements are contributing to affordability difficulties;
(f)	Whether the conclusions regarding (a)-(e) provide justification for government intervention in the residential strata insurance market, noting the existing responsibilities of Commonwealth, state and local governments, for example:

	the Commonwealth Government has responsibility for insurance regulation under the Insurance Act and the Insurance Contracts Act and competition and consumer regulation under the Competition and Consumer Act; and
	state governments (and local governments where appropriate) have responsibility for strata title legislation, building regulation, land use planning regulation and specific state government interventions in insurance markets (for example home builders warranty insurance, compulsory third party insurance).

The Inquiry should have regard to the following principles:

	Individuals and businesses should be encouraged to insure themselves where practicable.
	Government intervention in private insurance markets is justifiable only where, and to the extent that there is clear failure by those private markets to offer appropriate cover.
* Residential strata (or community) titled properties have a body corporate (or owners corporation, strata company, community association or similar arrangement) holding property on behalf of individual owners. The exact legal form varies with state and territory legislation. Bodies corporate are unlimited liability entities, with individual owners having a joint and several, unlimited liability to the body corporate. These properties can take a number of forms, from duplexes to gated communities to small and large apartment buildings. Individuals own a portion of the property (a lot) and there is also common property, of which ownership is shared.