"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."
- Mervyn Skeet, director of general insurance at the ABI
Insurance firms will now be forced to act in leaseholders’ best interests and treat them as customers when designing products. Similarly, advisers are now banned from recommending an insurance policy based on commission or remuneration levels while insurers will be required to ensure that their insurance policies provide fair and include all information about the policy and pricing, including any commission paid by leaseholders.
Responding to these new measures, Mervyn Skeet, director of general insurance 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.” The industry body recognises the “acute financial and emotional strain” that’s inflicted upon leaseholders and wants to “play our part in helping to reduce insurance costs whilst affected buildings await work to resolve fire safety issues.”
This is an important step, but it remains the case that the ultimate solution to the problem is to remediate buildings to a standard that saves both lives and property and we urge the Government to progress this urgently,” he continued.
Although Skeet is concerned that “producing a new range of clear, accurate and tailored consumer communications within a three-month implementation period is very challenging,” members of the ABI will “do everything they can to introduce these changes within the required deadline.” The ABI will continue to discuss these new measures with its members and the FCA to ensure the process is implemented “as smoothly as possible whilst keeping focused on delivering the new risk-sharing facility.”
“Work on this is progressing and we will update on launch plans as soon as possible.”
The British Insurance Brokers’ Association (BIBA) “welcomes the rule changes announced by the FCA […] In particular, we welcome the introduction of the new policy stakeholder status for leaseholders and the increased transparency requirements around insurance arrangements and remuneration.” BIBA has said these new measures coincide with “extensive new work” commissioned by BIBA to help members better demonstrate fair value for the activities and services they provide in this sector.
“This entails a new Fair Value Assessment Framework which members can adapt for their own business models to articulate, measure and evidence value for both the commission they retain and any commission they might share with freeholders and property managing agents (PMAs) for insurance-related activities they undertake,” the industry body explained.
“It also coincides with a new member pledge that BIBA members are being asked to sign up to which makes important commitments around remuneration practices for residential buildings over 11m in height that have material fire safety issues.”
The FCA’s new measures arrive as BIBA moves into an advanced stage in its work with the ABI and McGill & Partners to launch a new fire safety reinsurance facility for medium and high-rise residential buildings that have material fire safety issues. This scheme aims to reduce reliance on expensive excess of loss reinsurance placements which brokers need to purchase to ensure a building is fully insured.