When a community scheme appoints a new managing agent, a smooth transition usually involves the transfer of funds from one bank account to another, changing signatories, handing over accounting records, etc. Another important matter to deal with carefully during this process, is the handover of insurance information and documentation.
The new managing agent will need access to all the insurance information. You can find a useful template for a letter here that can be sent to the community scheme’s existing broker to request all relevant information relating to the scheme’s insurance:
As per the letter referred to in the previous paragraph, the newly appointed property manager will need access to insurance records and information. More about that here:
- A copy of the latest policy schedule and policy wording
These documents are needed on hand for easy reference as everything required to submit an insurance claim can be found there, such as the policy number, insurer, address of building, limits and excesses.
When a large emergency claim occurs, such as a fire or flood, you will need to have a claim form handy along with all the necessary information.
2. Confirmation that premiums are up to date
When a managing agent changes frequently, the debit orders may fall out of cycle. Remember that the insurer won’t pay claims if premiums are not up to date. It is not a great start for a new managing agent if an owner requests a geyser replacement and the insurer won’t authorise the claim until premium paid. Ask the broker to confirm the policy status.
3. A fresh debit order form
Each managing agent normally manages its own trust account for a scheme; for that reason, the accounts are usually closed off on the last day and debit orders usually returned after cut-off date. Once you receive the form, be sure to include the new bank account details and attach a bank confirmation letter (proof of bank details) to reduce the risk of fraud or cyber crime.
If the premium is in arrears, you can request for the insurer to collect a double premium at month end. The insurer will normally reactivate the policy upon receipt of the fresh debit order. Alternatively, the insurer may send an invoice for the arrears and request immediate payment.
4. The last written advice in respect of the policy
Ideally, there should be an annual letter of written advice on file from the broker. This annual letter is important as it protects the trustees as well as the portfolio manager in case anything goes wrong with a claim. If this is not provided, the broker should be advised that such a letter will be required with the next policy renewal.
5. The latest claims history
The latest claims history is needed to refer to in the case of queries relating to older claims. It is also useful to see when geysers were last replaced for mitigation planning purposes and to check on the date of last replacement in the case of a failed geyser.
6. Pending claims or intimated liability claims
It is important to obtain confirmation of possible pending claims. For example, an owner may have notified the previous managing agent about a flood in their section but had not yet provided the required information, resulting in the claim not being registered. If not followed up, the claim may later be rejected for late notification for which the body corporate will be held responsible.
7. Claims procedure or call centres
It is advisable to obtain the claims procedure from the broker upfront, setting out who to contact in respect of claims, especially in the case of call centres which may include additional benefits, such higher limits for geysers.
8. Stationery
It is advisable to have claims procedures and the necessary stationery, such as claim forms, ready so that when the owner calls with their insurance damages problem, you can provide them with quick and efficient claims service.
9. Confirm any additional policies
It is not uncommon for a community scheme to have more than one policy; for example, the main buildings policy may well include fidelity and property owner’s liability. However, many schemes opt to have the buildings insurance with one insurer and fidelity with another. A scheme may also purchase an additional liability policy to cover their broader risks such as an in-house gym, creche or frail care centre.
In addition, policies like those for levy guarantee and legal liability, are often overlooked in the handover from one managing agent to another, placing the body corporate at risk for policies to lapse.
10. Adverse policy conditions or restrictions
It is common practice for a managing agent to take over a body corporate policy and assume that all is in order. This is dangerous as there might well be outstanding matters or restrictions recently imposed, such as a requirement for the fire equipment to be rectified or waterproofing to be repaired before storm cover commences.
If this is overlooked, the new managing agent could be held liable in the case of a large event in the subsequent months.
Once the policy schedules have been received, be sure to check the following:
a) The building’s address: It is usually on the policy schedule (risk address) but it is prudent to first obtain the correct address and then check that the address on the policy is correct.
b) Copy of the sectional plans: Check for accuracy, i.e., whether the PQ matches the policy and if items such as servitudes or any buildings are noted in the policy.
c) Copy of the most recent valuation undertaken: Check that sums insured are correct.
d) Copy of latest financials and budget: Verify that the fidelity figures are correct.
If you are planning to change brokers, take your time and make sure everything is in order first. You may well find that the existing broker has actually done a good job. You can test them by asking them a few key questions as set out in a previous article.
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