"We recently received a letter from a small regional broker saying he was having to sell up, as he just couldn’t keep up with the influx of new and demanding regulations from the FCA."
- Graeme Trudgill, CEO of BIBA
In his first-ever opening address at this year’s British Insurance Brokers’ Association (BIBA) conference, Graeme Trudgill, CEO of BIBA, began by offering thanks to the industry for its ongoing support since his appointment. “When I took the role, we were facing one of our biggest threats to the insurance broking model that I have ever seen […] Michael Gove threatened to ban commission across all lines,” he explained.
In 2017, 72 people were killed in the Grenfell Tower tragedy, causing a national outcry over the safety of high-risk residential properties. Residents said they couldn’t secure mortgages or affordable insurance due to these structural risks, making their homes unsellable. Therefore, the Financial Conduct Authority (FCA) pushed the insurance industry to reduce premiums – or what Rt Hon Michael Gove MP described as “crippling costs.”
In October 2023, the FCA confirmed new measures which means firms have to act in the leaseholders’ best interests and treat them as customers when designing products. Notably, these new measures also ban advisers from recommending an insurance policy based on commission or remuneration levels while insurers are now required to ensure that their insurance policies provide fair value and include all information about the policy and pricing – this includes any commission paid by leaseholders.
At the time, Mervyn Skeet, Director of General Insurance (GI) at the Association of British Insurers (ABI) said: “Leaseholders deserve greater transparency on the details of their building insurance policy and so we welcome this confirmation from the FCA of the final rules.” Graeme agreed “[the sector is] very sensitive to the fact that in some cases premiums have increased significantly at a time when leaseholders are also being asked to contribute towards remediation costs and other costs such as waking watches.”
To support leaseholders, BIBA committed to a pledge with leading real estate members on insurance for cladded buildings, launched its Fair-Value Assessment Framework, and worked with the ABI and McGill & Partners to launch its new fire safety reinsurance facility for multi-occupancy buildings. “I’m glad these efforts will make a real difference to leaseholders and that subsequently Gove stood down on his threat to ban commission,” Graeme announced triumphantly.
Whilst discussing the protection gap and the challenges faced by small & medium-sized enterprises (SMEs), Graeme explained that “Nothing moves without insurance. Planes don’t fly, homes don’t get built, we couldn’t host this conference. So, my call to our industry is to innovate, to cover new risks, not to exclude them.”
He said: “Collectively we continue to discuss with the FCA the benefits of reducing the Consumer Duty scope to eligible complainants as per the Ombudsman definition, aiming to take many commercial clients out of scope.”
Despite the insurance broking sector surpassing £100bn of GWP, BIBA’s CEO said he’d recently received a letter from a small regional broker saying, “he was having to sell up, as he just couldn’t keep up with the influx of new and demanding regulations from the FCA.”
“I think you will agree that finding a professional broker put in that position isn’t right, so I want to remind the regulator today, that we’re a low-risk sector […] we don’t need another stream of new regulation,” he voiced.
According to Graeme, the Consumer Duty is an “overarching piece of regulation that mirrors much of what a broker has always done for their clients. We’re run by qualified professionals. So, please give us a period of stability. Allow us to breathe, to focus on clients and new innovation.”
Recently, BIBA’s advisory boards & committees sat down with the FCA for several “very constructive” meetings. Graeme hopes these conversations “gave the regulator a much better understanding of our sector, especially on matters like fair value, claims, and reporting.”
Having achieved its six-year lobbying objective to introduce a growth and competitiveness objective on the regulator, BIBA’s new focus will build upon those conversations, externally scrutinising any proposed new regulation for the insurance sector going forward.
“We’ve done this recently following the regulator's new proposals to name firms being investigated,” Graeme explained. Aimed at improving transparency, the FCA’s ‘name & shame’ proposal would allow the watchdog to move from naming firms under investigation in ‘exceptional’ circumstances to a looser ‘public interest’ test.
Earlier this month, Ashley Alder, Chair of the FCA, said that “no decision has been made” on how to follow through with the proposal, which had already received heavy criticism from the UK’s Financial & Legal Services as well as Jeremy Hunt.
“I think BIBA and the FCA are now in a better ace to ensure smarter and more proportionate regulation going forward,” Graeme concluded.
