The FCA has outlined new measures to support leaseholders in the multi-occupancy buildings insurance market.
From the new year, insurance firms will be forced to act in leaseholders’ best interests, treat leaseholders as customers when designing products and will be banned from recommending an insurance policy based on commission or remuneration levels.
Insurers will also be required to ensure that their insurance policies provide fair value to leaseholders and provide important information about their policy and its pricing, including the detail of any commission paid, for leaseholders.
The FCA’s action follows its review of the multi-occupancy buildings insurance market, which found that leasehold buildings insurance premiums had risen significantly since the Grenfell tragedy, with leaseholders facing substantially higher costs and poor value.
Sheldon Mills, executive director of consumers and competition, said: “Insurance firms must now act in leaseholders’ best interests and ensure that their policies provide fair value.
“Our reforms will help to strengthen the insurance market by providing new protections for leaseholders. We will not hesitate to take action if firms breach these rules.”
Following a review into broker remuneration practices, the FCA expects brokers to immediately stop paying commission to third parties (including property managing agents and freeholders) where they do not have appropriate justification and evidence for doing so in line with our rules on fair value.
The FCA says it will undertake further reviews across various products and will consider the full range of regulatory tools available to it as this work is progressed.
In addition to these measures, the Department for Levelling Up, Housing and Communities has announced that it intends to ban the payment or sharing of insurance commissions with property managing agents, landlords and freeholders. The FCA will work with DLUHC to ensure that this action is fully delivered, including changing FCA rules if required.
