Companies selling multi-occupancy insurance will have to act in leaseholders’ best interests under new proposals from the Financial Conduct Authority (FCA).
It is demanding new rights and protections to improve the transparency of the multi-occupancy leasehold buildings insurance market.
Under the plans, leaseholders would be defined as customers of buildings insurance and firms would not be allowed to recommend a policy based on commission or remuneration levels.
Insurers and brokers would also need to provide more information about insurance policies to leaseholders, including detail of any commission paid.
An FCA review found average per policy insurance broker commission rose by 46% between 2019 and 2022.
There were also “significant shortcomings” by some brokers in applying fair value rules to their remuneration practices – and the impact on those paying the costs of multi-occupancy buildings insurance.
It reports that leasehold buildings insurance premiums have risen significantly since the Grenfell tragedy, with leaseholders facing much higher costs.
Large commissions Sheldon Mills, FCA executive director of consumers and competition, says: “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.”
Andrew Bulmer, chief executive of The Property Institute, welcomes the focus on tighter regulation, fairness and transparency.
He tells LandlordZONE: “We remain firm in our position that leaseholder distress caused by an increase in insurance premiums, a lack of transparency and information, and suspicions for the potential unmanaged conflicts of interest, highlighted by the FCA, must be resolved to bring transparency and fairness to millions of leaseholders.”
Read more about multi-occupancy insurance. Subscribe here for the latest landlord news and receive tips from industry experts: