FCA concerned about commission splitting between insurance brokers and freehold owners of multi-unit buildings

[ad_1]

The regulator has expressed significant concerns about how insurance brokers operate in the multi-occupancy market.

The price of roofing these buildings skyrocketed following the tragedy at Grenfell.

A Financial Conduct Authority (FCA) review found that between 2016 and 2021 the average price of building insurance has more than doubled for these properties, with the typical cost now at £15,300.

This is partly because insurers are exiting the market or less eager to take on new business.

The FCA has also looked at how brokers often split an insurer’s commission with the property owner or property manager.

The regulator said managing agents collect service fees from tenants for activities related to building maintenance, including supply assurance.

In the report, he added: “It is often difficult to understand why it is appropriate or necessary for property management agents or landowners to receive additional compensation through brokerage commissions. We are very concerned that this practice does not ultimately represent value for the tenant.

As the cost of insurance soared, so did the commission.

The FCA found that the average absolute value of commissions more than tripled for brokers between 2016 and 2021 and more than doubled for property owners or property management agents.

However, tenants are unlikely to know that Freehold Landlords or Managing Agents receive this commission.

And these owners generally have no say in choosing the insurer or broker, despite the fact that this determines how much they have to pay for insurance and the benefits they can get from it, a added FCA.

Transparency, collaboration and information

As part of plans to help tenants with the cost of insurance, the regulator has suggested that a group of cross-industry insurers should cover multi-occupancy buildings.

The FCA said there was also a need to increase transparency and inform tenants about the price of insurance, so that it would be easier for them to challenge high insurance costs.

The regulator has also suggested the government legislate compensation for unregulated property managers and landowners.

It was also recommended that landowners and property managers should be required by law to provide insurance policy information to tenants.

This should include the transmission of information that insurers and regulated brokers provide to them.

Sheldon Mills, FCA’s Executive Director of Consumers and Competition, said: “Since the Grenfell tragedy, hundreds of thousands of tenants have had to endure the hardships of living in buildings with known fire safety issues and these problems have been compounded by the increase in the cost of their insurance.

“We will consult on measures to improve transparency for tenants on the price of their insurance and on how tenants can benefit from greater protection.

“We expect the insurance industry to work quickly with us and the government to develop solutions to this problem, including developing pooling arrangements and reducing commissions, which will make coverage more widely available. affordable insurance.

[ad_2]
Source link

Comments are closed.