For some years we have been aware of, and faced directly, issues in the opaque residential building insurance regime. There has long appeared to be evidence of cartel-like behaviour by the insurers, with apparent conflicts of interest between freeholders, brokers, and insurers, meaning the building insurance that leaseholders are forced to pay for is not, and never has been, fair or fit for purpose.
We are the ones who have to suffer insurance costs but we are usually unable to influence the selection of the broker and/or insurer, and avenues of seeking redress are inherently onerous, if not impossible.
Despite roundtable meetings with the Government and industry (see the notes from the March 11th meeting here), and our providing over a hundred examples of exorbitant building insurance cases, we are concerned that there is no onus on the Government to intervene to help leaseholders or expedite a resolution. We believe that this may, in part, be due to the taxation income on insurance premiums, as implicitly noted by John Glen MP, Economic Secretary to the Treasury on 11th January 2021 in response to a question on waiving Insurance Premium Tax on sky-high leaseholders’ premiums as a result of the building safety crisis.
The lack of any action by the Government to help innocent leaseholders led us to report building insurance issues to both the Competition and Markets Authority (CMA) and the Financial Conduct Authority (FCA) in May 2021 – you can read the report we submitted here.
The CMA responded that they had considered this specific issue in relation to their different tools (specifically market and consumer law) but the conclusion was that they do not believe they are suited to tackle these pressing issues, and have referred us to pursue this issue with the FCA, as this is the body that regulates how insurance firms behave, as well as more broadly the integrity of the UK’s financial markets. The FCA has responded to advise that it expects firms to:
- Consider whether the products they offer represent fair value
- Consider whether they are arranging insurance that is consistent with their obligation to act fairly and professionally, in the best interests of the leaseholders as well as the property owner
- Meet all applicable rules and take account of any wider legal obligations, e.g. under landlord and tenant legislation
- For regulated insurance intermediaries who receive remuneration for their work distributing buildings policies, to make sure the remuneration is consistent with the customer’s best interests rule
The FCA has further advised that it would encourage people affected by insurance premiums to ask their Managing Agent for “an explanation of the additional cost”. If the agent is regulated by the FCA, they would expect them to deal with any requests for information reasonably and to provide adequate information – should the responses be unsatisfactory then people may be eligible to complain to the Financial Ombudsman Service. The FCA has also asked for any “intelligence about regulated firms” that we believe are acting unfairly and told us this would be shared “with the relevant supervisory teams to inform their oversight of these firms”.
Take action: if you have relevant information, please email it to email@example.com so we can collate specific examples to share with the FCA.
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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