How Vero is shifting the conversation on strata defects
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Defects are now more commonly being disclosed during insurance placements. Vero looks beyond the label to understand each risk, how it’s managed and the pathway to remediation
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A GROWING number of strata schemes are identifying and disclosing defects in their buildings during the insurance placement process, often through inspection or defect reports commissioned proactively by the owners corporation or strata manager.
Water staining beneath a balcony, for example, should prompt a committee to engage a building consultant. If a report confirms membrane failure, the owners corporation may raise a special levy and implement a remediation plan. However, disclosure of those findings can sometimes reduce available insurance options, even though early identification, active management and remediation are hallmarks of good risk governance.
Vero is a leading business insurer with more than 190 years of experience helping Australian businesses understand, manage and reduce risk. Working primarily through insurance brokers and authorised representatives, Vero recognises the important role trusted advisers play in helping customers choose the right insurance solutions. By partnering closely with its distribution network, Vero provides expertise, support and service to help businesses make informed decisions. When claims arise, Vero works collaboratively with brokers, advisers and customers to support recovery and business continuity. Combining industry knowledge with practical risk insights, Vero helps protect Australian businesses for the long term.
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Understanding types of
building defects
A building defect is anything in a strata property that isn’t built correctly or isn’t functioning as intended. Defects range from small cosmetic blemishes to serious structural issues that can impact safety, amenity, compliance or insurability. Understanding the type of defect helps clarify urgency and the right pathway forward.
“The presence of a defect doesn’t automatically make a building uninsurable. Our focus is on understanding the nature of the defect, the potential for loss and how effectively the risk is being managed”
Peter Ooi,
Vero Insurance
“Historically, many brokers and owners corporations have experienced situations where the disclosure of defects has resulted in insurers declining to offer terms, imposing broad exclusions, increasing excesses or applying significant premium loadings,” says Peter Ooi, Strata Portfolio Manager at Vero Insurance .
Vero is taking a different approach. Through its underwriting assessment process for the recently launched Residential Strata Insurance product, Vero considers the nature of the issue, the potential for loss, the controls in place and the owners corporation’s commitment to remediation. For brokers, that means the quality and currency of the supporting information can be just as important as the defect itself.
Disclosure enables a clearer assessment For Vero, it’s the context around the defect that shapes the conversation. “We believe disclosure should be encouraged and supported. Transparent disclosure allows insurers to properly assess the circumstances, understand what controls are in place and evaluate the remediation strategy,” Ooi says.
Disclosure is the starting point, rather than the full measure of risk. Governance, appropriate interim controls, realistic funding and follow-through help show whether an issue is being actively managed.
That stance is part of a broader push at Vero to build specialist expertise in the increasingly complex strata market. Since launching Vero Specialty Lines, Vero has progressively expanded its offerings to address evolving customer needs through specialist products and underwriting capability. These include equipment breakdown insurance, higher hazard liability solutions and Vero Residential Strata Insurance.
Importantly, Vero Residential Strata Insurance is designed to support the full spectrum of strata properties, from straightforward residential buildings to more complex risks requiring specialist assessment. The focus on defect assessment is one example of that specialist capability.
Not all defects are created equal Part of the difficulty lies in the language. The term ‘building defect’ can describe issues with vastly different implications. Proposal forms may capture a superficial crack, a maintenance issue and a major structural concern under the same tick-box, but those issues do not present the same exposure.
“The presence of a defect doesn’t automatically make a building uninsurable. Our focus is on understanding the nature of the defect, the potential for loss and how effectively the risk is being managed,” Ooi says.
Vero uses three categories to help clarify the difference: cosmetic, minor and major defects. This avoids treating defects through a simple yes-or-no lens and helps brokers and owners corporations understand the severity and potential impact of each issue.
Vero’s underwriters work through practical questions when assessing a defect-affected building: Has the defect been assessed by a suitably qualified engineer or building consultant? Are interim controls in place and being monitored? Is there a realistic rectification plan with defined milestones and timelines? Has the owners corporation demonstrated the willingness and ability to fund and complete the work?
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Published 2 Nov 2026
“Don’t just tell us the building has a defect. Tell us the story of how it’s being managed. Transparency, risk controls and a credible remediation plan give underwriters confidence”
Peter Ooi,
Vero Insurance
Cosmetic
Superficial issues affecting appearance only. Examples include chipped paint and hairline plaster cracks. These pose no material risk and generally do not impact insurability.
Minor
Issues affecting amenity or appearance but not structural integrity, such as minor water staining or non-structural cracks. These represent low risk but require monitoring and generally do not impact insurability.
Major structural defects
Significant issues that may impact safety or structure, such as slab cracking, foundation movement or water ingress affecting structural elements. These require prompt rectification and may impact insurability if unmanaged.
Source: Vero
Source: Vero
Qualifying the defects
What defects have been identified?
Has a qualified engineer or building consultant assessed them?
How recent is the report? Ideally within 12 months.
Have any claims or incidents occurred due to the defect?
Building defect assessment:
key considerations
Building defects should not be viewed through a simple yes-or-no lens. Vero’s assessment focuses on understanding the nature of the defect, the likelihood of loss and how the owners corporation is managing the risk. These are some of the key questions underwriters may consider when assessing a building with a known defect.
Quantifying the risk
Is there potential for an insurable loss?
What is the likely severity?
What are the likely types of losses expected?
Has a Building Order, Fire Order or Direction to Rectify been issued in relation to the defects?
Mitigation and control
What interim risk controls are in place?
How are these controls monitored and enforced?
Are emergency protocols documented and communicated?
Rectification and governance
Is there a formal rectification plan?
What work has already been completed?
What work is outstanding?
Is the timeline for the outstanding work achievable?
The aim is not simply to understand whether a defect exists, but to understand the current exposure, the controls in place and the pathway to remediation.
“Cosmetic and minor defects are generally not a significant concern, as they typically have limited impact on safety, structural integrity or insurability. More serious defects, particularly those with the potential to cause structural failure, water ingress, fire risk or other significant losses, warrant closer assessment,” Ooi explains.
The difference is in the response For Vero, the focus then shifts from the defect itself to what happens next. “For us at Vero, it’s less about whether a building has a defect and more about how the owners corporation responds to it. Well-governed committees acknowledge issues early, seek expert advice, fund solutions and follow through,” Ooi says.
Remediation on a large scheme can take months or years, leaving a period where the issue is known, but the works are still underway.
“They also focus on controlling exposures while rectification is taking place, implementing appropriate interim measures to reduce the likelihood and severity of loss before remediation is fully completed. Those behaviours are often a stronger predictor of risk performance than the defect itself,” Ooi adds.
“Where there is strong governance, effective risk management and a credible pathway to remediation, we’re often able to focus on the actual exposure rather than simply the existence of the defect,” says Ooi.
What brokers can bring to the assessment For brokers, the conversation does not end once a defect has been identified. The challenge is helping underwriters understand the issue, the exposure it presents and how it is being managed.
“Don’t just tell us the building has a defect. Tell us the story of how it’s being managed,” says Ooi. “Transparency, risk controls and a credible remediation plan give underwriters confidence.”
A building with a known defect can look very different when supported by detailed engineering advice, a funded remediation plan and evidence that risks are being actively managed. That broader context helps underwriters move beyond the defect itself and understand the exposure they are assessing.
“Ultimately, we’re looking to understand three things. What is the risk today? What is being done to control it? And what is the pathway to remediation? The more complete and current the information, the greater the confidence insurers can have in assessing the risk,” Ooi says.
This article is sponsored by Vero Insurance. The information is intended to be of a general nature only. Subject to any rights you may have under any law, Vero Insurance and its related bodies corporate do not accept any legal responsibility for any loss or damage, including loss of business or profits or any other indirect loss, incurred as a result of reliance upon it – please make your own enquiries.
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