Proposals to reform flats insurance market set out by City regulator

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People living in blocks of flats may get more protection from higher insurance costs under the city regulator’s steps to improve the way the building insurance market operates.

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A cross-industry risk-sharing plan may be established to limit the risk to individual insurers posed by buildings affected by flammable cover or other fire safety risks. The Financial Conduct Authority (FCA) said this could help bring down the cost of insurance for these buildings.

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Since the Grenfell tragedy, leaseholders have faced a substantial increase in insurance costs.

The FCA report stated: “In addition to the immediate magnitude of the events of 14 June 2017, hundreds of thousands of leaseholders subsequently endured the hardships and trauma of living in buildings with known fire safety issues.

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“These problems have been compounded by a related increase in the cost of their insurance.”

The regulator was asked to review the market for insurance of multi-occupancy residential buildings and explore ways to provide better value cover for lessees.

The review found that the supply of insurance for multi-occupancy residential buildings declined between 2016 and 2021, with some insurers leaving the market, and decreased appetite to take on new business, among others.

Industry figures from 2016 to 2021 show that the average price of premium for such buildings has more than doubled in this period, from £6,800 to £15,300.

Sheldon Mills, Executive Director of Consumers and Competition at FCA, said: “Since the Grenfell tragedy, hundreds of thousands of leaseholders have endured the hardships of living in buildings with known fire safety issues and these problems were made worse by the increase. in the cost of their insurance.

“We will consult on measures to improve transparency for leaseholders regarding the cost of their insurance and how more protection can be given to lessees.

Since the Grenfell tragedy, hundreds of thousands of leaseholders have endured the hardships of living in buildings with known fire safety issues, and these problems have been made worse by the increase in the cost of their insurance.

“We expect the insurance industry to work quickly with us and the government to develop solutions to this issue, including developing a pooling mechanism and reducing commissions that will make affordable insurance cover more widely available. “

FCA said it would provide an update on progress towards possible measures in six months.

James Dalton, director of general insurance policy at the Association of British Insurers (ABI), said: “We are fully aware of the challenges faced by leaseholders from the cladding and fire safety crisis.

“We support the FCA’s recommendations on a risk-sharing plan and are actively discussing various options with industry and the government. Our work in this area will continue rapidly.

“The FCA’s detailed analysis provides important insights on the state of the insurance market for high-rise residential buildings with a clear recognition that there is no evidence that insurers are making excessive profits.

“We recognize the issues raised by FCA regarding the availability of information on these buildings and will work with our members, regulators and relevant industries to achieve greater consistency in recording data.

“We are also committed to improving transparency for leaseholders and will work with the FCA to implement a framework that enables this.”

Simon Clarke, Secretary of State for Leveling Up, said: “Leaseholders must be protected and I welcome the light that the FCA report has shone on some dangerous, if not outrageous, industry practices.

“The management of agents taking bribe from brokers is wrong and should be stopped immediately.”

Credit: www.standard.co.uk /

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