The $800 Strata Claim That Will Cost You $2,700 — The Maths Every Committee Needs to See

In the war on levies, strata insurance requires a strategic approach.

Your building's lift panel needs a $2,000 repair following accidental damage. Your excess is $1,200. Should you claim the $800 difference? The financially literate response is no. Here's why.

A $100 insurance claim doesn't cost $100. By the time it flows through to your premiums, it costs about $345 for residential buildings, and over $400 for commercial or mixed-use buildings with significant commercial floor space. That's because of the layers of tax the government imposes: the Emergency Services Levy, GST on the premium, and the levy itself. Then, stamp duty is applied to the premium, the levy, and the GST.

When you claim that $800 repair, you're not just recovering $800. You're signalling to your insurer that your building generates claims. That affects your loss ratio. That affects your premiums at renewal. And because of the tax structure, every dollar claimed costs three to four dollars in future premiums.

So what does that $800 claim actually cost you over time?

If you pay the $2,000 repair yourself, it costs $2,200 after GST. If you claim the $800, you'll pay roughly $2,700 in increased premiums over time, plus you've still paid the $1,200 excess. The mathematics are clear: self-funding minor maintenance is cheaper.

Why have insurance excesses climbed so dramatically?

This is why deductibles have climbed. A decade ago, the industry average was $100 to $200. Now it's around $1,200. That's not insurers avoiding claims. It's economics. Small claims are inefficient for everyone but the government. It collects tax on every dollar of premium, whether the claim is $100 or $100,000.

When is insurance actually worth using?

Insurance is efficient for big capital losses. A roof replacement after a storm. Major water damage across multiple levels. Catastrophic events that cost tens or hundreds of thousands of dollars to repair. That's when you claim on insurance. The cost is spread across the entire portfolio, making the tax burden smaller relative to the claim value.

Insurance is inefficient for routine maintenance and small repairs. A cracked pipe. A damaged intercom. Minor storm damage to common property. These are operating expenses that should be budgeted for in the administrative fund. They shouldn’t go through insurance where the government takes its cut three times over.

What should a financially sophisticated committee do differently?

Committees need to think commercially. Set an internal threshold well above your excess for what's worth claiming. If your excess is $1,200, consider not claiming anything under $5,000 unless it's part of a larger event.

Be strategic: understand that insurance is risk management, not a maintenance funding mechanism. Budget for routine repairs and small incidents in your operating funds. Claim only when the loss is significant enough that the tax burden is proportionally smaller, or when the event is catastrophic and you have no choice.

What does getting this wrong really cost you?

A financially savvy committee views claims like any other spending decision: what's the true cost over time? A $5,000 repair might seem worth claiming when your excess is $1,200. But if that claim costs you $17,000 in higher premiums over the next few years because of the tax structure and loss ratio, you've made a bad commercial decision.

Schemes that understand this will have lower premiums, better cash flow, and more control over their finances.

Insurance works when it's used for what it's designed for: catastrophic loss. Funding everything else directly is cheaper. That's not theory. That's mathematics.