Insurance Giant Steadfast Halts Trading Amid Allegations Of Misleading Clients

Steadfast, a prominent strata insurance brokerage and underwriter, suspended trading on the Australian Stock Exchange after a media investigation exposed undisclosed financial arrangements between insurers, brokers, and strata managers, which were inflating insurance costs for property owners.

The Australian Competition and Consumer Commission said the revelation against the AU$7 billion publicly traded insurance giant was "of concern," reported ABC News.

Presently, the company brokers 40% and writes 55% of Australia's strata policies.

ABC News' Four Corners began probing the strata industry after allegations surfaced that a high-profile company was imposing hidden insurance charges amounting to millions of dollars and receiving kickbacks from contractors.

In March, the high-profile strata firm Netstrata was accused of receiving kickbacks and the managing director, Stephen Brell, stepped down from his position as the NSW president of the industry peak body, the Strata Community Association.

Following the revelation, the NSW government had introduced new legislation to strengthen any oversight of the industry and beef up the strata managers' disclosure requirements.

Steadfast posted a net profit of AU$252.3 million, after deducting tax, for the 2023-2024 financial year, up by 21.8% from 2022-2023, reported The Guardian.

The company has requested ASX to halt trading until it responds to ABC's report or till Wednesday morning, whichever came first. On Monday, the company's share price fell 6.14% to AU$5.96.

Steadfast Group's chief executive, Robert Kelly, admitted that apartment owners were often clueless about the schemes. "I think that's the gap," he said. "They have no idea."

Kelly, however, denied the company misled its clients. The payment systems were not created to evade standard disclosure obligations by strata managers, but it was the responsibility of strata managers to disclose the financial arrangements, he added.

ACCC chair Gina Cass-Gottlieb said undisclosed financial arrangements were deceptive and asked for a ban on strata insurance commissions, which were adding to insurance costs, reported ABC News.

"There are a set of hidden arrangements that are ... not disclosed, but also circumvent disclosure of fees," she said. "The receipt of hidden payments and commissions of whatever nature is misleading consumers."

Since it was listed on the Australian Securities Exchange in 2013, Steadfast has seen substantial growth, acquiring insurance brokers and underwriters with a combined value exceeding AU$1.6 billion. The strata business now accounts for over 20% of the company's profit, having generated AU$43 million in 2023.