Buildings insurance - what every leaseholder needs to know
This podcast features LEASE senior adviser Nicholas Kissen in conversation with barrister Justin Bates, Barrister at Arden Chambers. Justin’s practice focuses...
21 April 2023
Today the Financial Conduct Authority (FCA) announced a consultation on proposed rule changes, after its September 2022 report identified issues within the multi-occupancy building insurance market which are leading to poor outcomes for leaseholders. Based on feedback to that report FCA is proposing rule changes which aim to ensure that:
- the interests of leaseholders (and others in similar positions) are properly considered when firms design their products;
- prices are fair value to leaseholders as well as freeholders;
- remuneration of all parties involved in insurance distribution has a fair relationship to the benefits provided to leaseholders; and
- leaseholders have sufficient information to challenge poor practices and unfair costs passed on to them.
FCA seeks responses to its proposals by 9 June 2023; and it intends to publish a policy statement in Q3 2023 with its response to feedback and its final rules.
The FCA also published its ‘Multi-occupancy buildings insurance – broker remuneration’ review today. The review analysed data from 16 insurance brokers about their work on leasehold multi-occupancy buildings insurance, considering data on policies and remuneration from 1 January 2019 to 30 September 2022 and they found:
- that absolute levels of remuneration, including commissions, have risen by nearly 40% between 2019 and 2022 and that the 16 brokers in its sample paid over £80m of insurance commission to other parties (including freeholders and property managing agents) during the period; and
- Most of the brokers in our sample did not give FCA adequate evidence to show that they deliver fair value consistently for multi-occupancy buildings products.
The FCA’s press release said:
“We expect brokers to immediately stop paying commissions to third parties (including property managing agents and freeholders) where they do not have appropriate justification and evidence for doing so in line with our rules on fair value.”
Sheldon Mills, Executive Director of Consumers and Competition, said:
“We want to give leaseholders more rights and the information they need to exercise them. Importantly, under our proposals those selling multi-occupancy insurance will have to act in leaseholders’ best interests.
Our review revealed large commissions paid by some brokers to freeholders and third parties, like managing agents, with little evidence of any value added to justify these payments We are taking action against these practices and we won’t hesitate to take further action if brokers don’t comply with our rules.”
Other information you might find helpful:
- What can I do if my landlord fails to provide information about the insurance cover?
- Template 1 – Letter to landlord asking for insurance summary
- Template 2 – Letter to landlord asking to inspect insurance policy
- Water has leaked into my flat from the flat above and caused damage to my property. What can I do?
- About the FCA