EOCS campaigners met representatives from the Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA) along with Lord Greenhalgh and Ministry of Housing, Communities and Local Government (MHCLG) civil servants on March 11th.
We had been pushing for this meeting for months without much success and were kindly assisted in arranging it by the Bishop of Newcastle, who pressed Lord Greenhalgh on what plans there were to agree a joint approach. The roundtable invitation soon followed the response from Lord Greenhalgh.
The agenda for the meeting was:
1. Purpose of the meeting and introductions
2. Government role
- Defining and understanding the drivers of price change
- Data and evidence analysis
- Comparison/explanation of risk pooling in other insurance areas
3. Insurers and insurance industry
- How insurers understand and assess risk in High-Rise Residential Buildings
- Explanation for low-risk appetite
- Industry response to affordability challenge
4. Leaseholder representatives
- Examples of remediation conditions imposed by insurers
- Wider feedback and comment
5. Next steps
As well as the aforementioned attendees, representatives from the five major insurers (Aviva, AXA, RSA, Zurich and Allianz) were at the meeting, alongside officials from the Treasury and the Competition and Markets Authority, which is currently investigating breaches of consumer protection law in the leasehold housing market.
The Government / civil servants and the Insurance industry set out their respective positions: on how the insurance market is cyclical and has hardened, and buildings were being assessed very carefully (leading us to believe proper assessments had not taken place for years).
The major insurers repeatedly expressed warm words of sympathy for the position we have been forced into, but refused to accept that the soaring insurance premiums represent a market failure. The insurers did admit that there was a subset of buildings that they “would rather not insure”, and one insurer said this was around 8% of the policies they issue, meaning an approximate total of 3,000 buildings that were affected across the country.
The insurers also noted that they had been making a loss due to paying out for increased flooding costs – we refused to accept this as any sort of reasonable rationale for buildings insurance increasing, particularly given the Flood Re scheme was designed to pay out for incidents.
The representative from BIBA advised that we should look at the next renewal as soon as possible and not wait until it was due – the ‘advice’ was to ensure the broker and insurer had all the up-to-date information on the building, as well as remediation plans. We firmly noted the fallaciousness of this suggestion, given the long-standing issue leaseholders have of even obtaining any information about our insurance premiums, as many Freeholders placed this themselves historically and gave no regard to our comments or concerns. We noted that the buildings insurance industry had long suffered from a lack of transparency, given the commission arrangements we were aware of between insurers, brokers and the freeholders.
We said we understood the usual factors given for insurance increasing but these seemed to be excuses to us, and we could not wait for a return to ‘normality’ in a year or two. We expressed our disappointment that it had taken so long for the insurers to return to the table to speak to us – this seems more due to the negative publicity on this subject rather than being a truly willing desire to constructively resolve this serious issue.
We firmly stated that this is a wide issue in all buildings and not just high-rise residential buildings.
We also noted that the subset of buildings the insurers did not want to insure was known to them, and that the repeated claims by the insurers that they “did not recognise” the data we had provided was neither helpful nor accurate given the data they clearly hold. We expressly stated that the number of buildings affected was a clear sign that the Government needed to intervene, both due to the failure of the insurers and brokers to raise affordable premiums for safety issues in buildings that were not our fault, as well as the overriding moral imperative.
Our focus was on pushing for a solution to this ongoing issue, which was and still is affecting many of the people we represent – in our view, the only real way to reach a resolution quickly was through the form of a public/private partnership, which James Dalton, the ABI’s Director of General Insurance Policy, had noted in his February 9th blog: Answering your questions on combustible cladding and insurance.
We asked whether there had been any sort of impact assessment around what the potential annualised payout of this sort of public/private partnership and risk-pooling would be, as we had been informed this would potentially be around £30-50m. Despite Treasury officials (where the blame is usually cast by MHCLG for failure to arrive at a solution) being on the call, there was no response to this point.
We reiterated that we had been raising this issue repeatedly for months and we had sent MHCLG a lot of data to evidence the unfair rise in premium costs, but our discussions had just gone around in circles as MHCLG simply kept asking for more data. We had also fed data to UK Finance and the Building Societies Association for their representations on this subject, as well as to The Association of Residential Managing Agent’s (ARMA) proposal for the Government to accept the risk on fire related loss over a set level, with the analysis of 143 blocks showing an average increase of 374% per block.
To add to our frustration, James Dalton said that he had not seen the ARMA proposal and that the data we had provided did not include all the information required, i.e., the broker information. Mr Dalton then asked us to provide the full dataset. Our view is that this was not a constructive response because those present on the call hold the required data already, and it is unreasonable to request that leaseholder groups keep asking our members to provide this, particularly as leaseholders cannot always obtain such information, even with repeated requests.
Whilst we have conducted a short survey to capture this information, we have emailed the meeting attendees with a firm request that the ABI and BIBA work together to anonymise the data they hold and share with MHCLG and Treasury – this would be more appropriate and a quicker way to get the full metrics required.
Following the meeting, we have been informed by ARMA that Mr Dalton has contacted ARMA CEO, Dr Nigel Glen, to discuss a potential solution. This is annoyingly late but a little positive movement in the right direction.
We also urged the Government to go beyond simply considering this, and to work with the ABI towards such a solution immediately, rather than prevaricate with further requests for us to supply even more data.
Our firm view is that a pooling of risk and agreement to pay out, should there be an incident, is the most straightforward way to break this deadlock, but it needs the buy-in of Treasury, who to date continue to be silent rather than communicating with us.
We called out the complete unfairness of Treasury benefitting from our members’ misery through the forced payment of 12% Insurance Premium Tax (IPT) and we noted cases where this tax now exceeded prior premiums. We asked for Treasury to consider the position in respect of this gravely unfair cost and remove it from affected buildings. This is something we will pick up during our next meeting with Lord Greenhalgh and the MHCLG, as the Treasury is now due to join that meeting.
We also noted that the Government repeats that fire incidents are reducing, and it was therefore inconsistent for insurance costs to be rising so dramatically. We noted examples of soaring insurance and have followed this up by email to include a contrast with the Royal Borough of Kensington and Chelsea, where the Grenfell Tower tragedy occurred, and where buildings insurance has risen a (relatively lower) 90%.
Our view is that placing insurance under a blanket policy, with buildings at higher risk of fire attaining a much lower premium than relatively safe buildings, is a sign of market failure. There is no clear evidence that underwriters are following a common and transparent approach to the setting of premiums, and there is a lack of justification and consistency in how insurance is currently being priced, as it does not reflect the actual risk.
We explicitly repeated the fact that insurance costs are ruining people’s lives right now, and this is another example of how we, innocent victims of the building safety crisis, are on the hook for costs and not being helped by the Government despite our repeated requests and representations over the preceding year.
We are now in the process of ensuring this unfair matter is reported to the relevant authorities that may be in a position to help leaseholders – we will share details of this shortly.
The End Our Cladding Scandal campaign calls on the Government to lead an urgent, national effort to fix the building safety crisis.
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