Insurance Premium Funding in Strata Management

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As strata insurance premiums continue to skyrocket – is Insurance Premium Funding the timely solution for strata communities?

Insurance Premium Funding: What is it?

Insurance Premium Funding (IPF) is a financial solution designed to help Owners Corporations manage their insurance costs more effectively. It allows owners to spread the cost of insurance premiums over time, typically in monthly or quarterly instalments, instead of paying a lump sum annually. IPF ensures that Owners Corporations can maintain comprehensive insurance cover without straining lot owners’ cash flow. Indeed, given the time constraints on paying premiums, sometimes Owners Corporations have missed premiums simply because of the time required to issue levies and receive payment – IPF eliminates that risk.

Changing dynamics of the insurance market.

Rising inflation, supply chain constraints, catastrophic weather events, scarcity of materials and labour shortages are all factors driving the increasing costs of insurance in strata. Add in changes to global reinsurance markets and we have a perfect storm (somewhat literally). The statistics are telling:

  • Premium increases: Over the past few years, the insurance landscape has witnessed a significant rise in premiums. Buildings with defects have experienced premium hikes of over 40%, while those with no identified defects have seen increases of more than 15%. These escalating premiums have put financial pressure on lot owners in a market where delay in paying premiums can mean loss of insurance cover.
  • Reduced cover for defective buildings: Buildings with defects are now at increased risk of reduced cover or even denial of cover. Insurers no longer put up with delays to remediation works where their cover is contingent on carrying out those works – they simply pull their cover. This places additional strain on strata managers who must react quickly to ensure the continued coverage of their client’s property.

How Insurance Premium Funding can help?

IPF offers a practical solution to the challenges posed by the changing insurance market. Here’s how IPF can make a difference:

  • Smooth the financial impact: IPF spreads the financial impact of premium increases over 12 months, making it more manageable for lot owners managing their own cash flows.
  • Flexibility: IPF provides the Owners Corporation with flexible and pragmatic funding tailored to their specific needs. It offers a fast and secure way to access 100% of the premium required at the time it is needed.
  • Low administrative burden: Managing IPF is straightforward and comes with minimal administrative strain. It also complies with strata legislation and credit codes, ensuring a smooth process.
  • Peace of mind: With IPF, a strata finance provider pays the insurance policy in full at the beginning of the loan term, guaranteeing uninterrupted coverage. There’s no risk of policy cancellation due to late or missed payments – no more worries about unpaid levies compromising insurance cover!
  • Dedicated support: Strata finance providers offer dedicated Relationship Managers, transparent rates, and personalised guidance throughout the process.

Insurance Premium Funding appears as a very timely solution for strata communities struggling to weather the perfect storm of skyrocketing insurance premiums.

Thank you to the team at Lannock Strata Finance for providing us with this information – visit their website to see how they can help with your owners corporation lending needs.