Steadfast Group Faces Claims of Misleading Clients Amid Trading Suspension

Steadfast Group, a prominent strata insurance brokerage and underwriter in Australia, has seen its shares drop by 6.14% to $5.96 following serious allegations of misleading clients. The company, valued at $7 billion, has suspended trading on the Australian Stock Exchange in response to a report from the ABC‘s Four Corners program.

The allegations include claims that undisclosed financial arrangements between insurance companies, brokers, and strata managers have resulted in inflated insurance costs for property owners. Reports suggest that a broker owned by Steadfast allegedly recommended a more expensive policy from one of its affiliated firms while failing to disclose a cheaper option from a competitor.

Steadfast Group is noted for being Australia’s largest general insurance broker network, managing 40% of strata insurance brokerage and underwriting 55% of strata insurance policies. The company reported a net profit after tax of $252.3 million for the 2023-2024 financial year, reflecting a 21.8% increase compared to the previous financial year.

In an official statement made to the ASX, Steadfast requested a trading halt until it could issue a response to the ABC’s allegations or until trading resumed on Wednesday morning, whichever came first. The CEO of Steadfast Group, Robert Kelly, has denied the accusations of misleading clients, asserting that the financial arrangements in place were the responsibility of strata managers to disclose.

The chair of the Australian Competition and Consumer Commission (ACCC), Gina Cass-Gottlieb, has called for a complete ban on commissions in the strata insurance market, arguing that undisclosed payments are misleading consumers. She stated that the current disclosure obligations do not adequately address the core issue of financial incentives that encourage brokers to recommend higher-cost insurance policies.

Furthermore, the investigation revealed arrangements where insurance commissions were funneled to strata management companies without informing the property owners who ultimately bear the costs. The ACCC has expressed concerns that these hidden payments and commissions contribute to rising insurance premiums and create conflicts of interest.

Additional scrutiny has emerged regarding Steadfast’s practices in light of previous reports detailing hidden fees within the strata industry. These revelations have prompted discussions regarding the need for increased regulatory oversight, particularly concerning Steadfast’s rapid expansion in the strata sector since its public listing in 2013.