Legislative Shifts and Ongoing Obligations
As insurance costs continue to rise and legislative frameworks evolve, strata communities across Australia, including Body Corporates (QLD), Strata Companies (WA), and Owners Corporations (NSW, VIC) are under growing pressure to make sure their schemes are adequately insured. While terminology varies by state, these entities share similar responsibilities under their respective legislation. Strata reforms are introduced on a state-by-state basis, so changes may be implemented at different times across the country, the latest updates have been applied in New South Wales. Understanding the nuances of insurance valuation requirements, and the overarching duty to maintain sufficient coverage has never been more critical.
What's Changed in Strata Legislation?
In NSW, the Strata Schemes Legislation Amendment Act 2025 NSW has introduced a suite of reforms aimed at improving transparency, accountability, and compliance across strata communities. Key changes include:
- Stricter disclosure requirements for strata managers regarding insurance commissions and affiliations.
- Mandatory training for strata committees to better understand their obligations, including insurance compliance.
- Greater enforcement powers for NSW Fair Trading to investigate and crack down on non-compliance with insurance and maintenance duties.
These reforms reflect a broader trend toward ensuring that strata schemes are not only well-managed but also financially protected against risks. While these changes are NSW-specific for now, other states may follow suit when they next review their own legislation.
Rising Construction Costs: A Key Insurance Factor
Since March 2020, construction costs across Australia have surged due to inflation, supply chain disruptions, and labour shortages. These increases directly impact insurance valuations, which must reflect full replacement value, not historical build costs.
Compounded Construction Cost Increases by State (March 2020 – June 2025)
| ESTIMATED COMPOUND INCREASE (%) | DRIVERS | |
| NSW | +33% | Driven by major infrastructure (e.g. Sydney Metro), labour cost pressures |
| VIC | +31% | Contractor solvency issues and delays impacting escalation |
| QLD | +34% | Olympic-linked projects and strong demand for concrete/rebar |
| SA | +30% | Industrial growth offset by skills shortages |
| WA | +33% | Supply issues in plasterboard and concrete persist |
| TAS | +33% | Government spending offsetting softer private demand |
| NT | +29% | Labour and material supply constraints |
| ACT | +32% | Surge in commercial and government projects |
| AVG. | +31.7% | Reflects cumulative escalation across all sectors |
Source: Rawlinson’s Australian Construction Handbook 2025
These figures underscore the essential need for up-to-date insurance valuations to avoid underinsurance in the event of a claim.
Legal and Practical Imperatives of Insurance Valuations
Under current legislation, Body Corporates are required to insure common property and assets to their full replacement value, regardless of original construction costs. This obligation is consistent across various plan formats and jurisdictions, including for example the Queensland’s Standard and Accommodation Modules.
While legislation typically mandates insurance valuations every 5 years, this interval is increasingly seen as inadequate in today’s volatile construction environment.
A three-year full replacement cost assessment with physical inspection, supported by annual desktop updates, is strongly recommended to:
- Reflect rapid cost escalations more accurately
- Tailor coverage to current market conditions
- Reduce the risk of underinsurance
- Account for any material changes to the property
The Role of the Strata Manager
Strata Managers play a key role in ensuring compliance with insurance obligations by;
- Coordinating insurance valuations with qualified professionals
- Facilitating transparent insurance placement, including disclosure of commissions
- Advising committees on coverage adequacy and renewal timelines
- Maintaining documentation to demonstrate compliance
Recent reforms have also introduced unfair contract term protections for owners corporations, placing additional scrutiny on the terms of insurance-related agreements.
Adequacy is Non-Negotiable
While legislative changes may vary across states, the overarching obligation remains clear: Body Corporates must ensure their schemes are adequately insured. It’s not just a legal requirement, it’s a fiduciary duty to lot owners, lenders, and the broader community.
With premiums climbing and regulators paying closer attention, taking a proactive approach to insurance is essential. Engaging qualified valuers, maintaining transparent records, and fostering informed decision-making within the committee are all part of a robust compliance strategy.
Need help navigating your next insurance valuation?
Acumentis offers independent, certified insurance valuations tailored to your scheme’s needs. Reach out to our team to ensure your strata community remains protected and compliant.