With effect from 1st January 2024, the Financial Conduct Authority (FCA) are introducing new legislation with regards to Residential Multi-occupancy Buildings Insurance.
The policy statement issued by the FCA outlines the proposed remedies to address issues with transparency, product design and remuneration practices. The full statement is available here.
At Lansdown, we want to be as open as possible with our clients, that’s why we’ve covered below:
- Why this regulation has come in
- What it means for leaseholders
- Further questions you may have about your insurance
The Financial Conduct Authority (FCA) recently published a comprehensive report addressing concerns in the multi-occupancy residential buildings insurance market. This market, which provides insurance coverage for residential buildings with multiple occupants, has been facing significant challenges in recent years. The regulatory interventions proposed by the FCA are aimed at rectifying these issues and providing better protection for leaseholders.
- Improved Transparency and Information Sharing:
One of the key areas addressed by the FCA’s regulation is the need for transparency and information sharing. The proposed changes require freeholders and property managing agents (PMAs) to share insurance policy information with leaseholders. This will give leaseholders a clearer understanding of their coverage, ensuring they are better informed about their financial responsibilities.
- Simplified Arbitration for Challenging High Costs:
The FCA’s regulations introduce a simple arbitration solution that allows leaseholders to challenge costs. At Lansdown, we’re entirely transparent with clients in terms of the breakdown of their insurance premium. This information will be included in welcome and renewal letters.
- Classification of Leaseholders as Customers:
The FCA’s proposal to classify leaseholders as customers of Buildings Insurance is a significant step. Previously, leaseholders were often left out of the decision-making process regarding insurance coverage. This classification ensures that their interests are taken into account when determining insurance terms and conditions, and it empowers them to make more informed choices.
- Risk Pooling for Flammable Cladding:
One of the most critical issues in recent years has been the presence of flammable cladding on residential buildings. The FCA proposes creating a cross-industry risk pool to limit the exposure of individual insurers to these risks. By doing so, the FCA aims to
protect both leaseholders and insurers by creating a more balanced and financially secure system.
- Enhanced Industry Oversight:
The FCA will review broker commission arrangements to ensure they deliver fair value. At Lansdown, we always provide our clients with the best price and cover for their needs and provide a detailed breakdown of the cost.
The FCA’s multi-occupancy residential buildings insurance regulation represents a significant step towards enhancing the rights and protection of leaseholders. By promoting transparency, introducing arbitration mechanisms, and recognising leaseholders as customers, these regulations aim to create a more fair and secure insurance market.
Your questions answered…
What are the benefits of using an insurance broker like Lansdown?
Using an insurance broker provides many benefits, making the process of securing insurance coverage easier, more informed, and potentially more cost-effective. Here are some of the key advantages of using Lansdown insurance brokers:
- Expertise and guidance – we’re specialists with in-depth knowledge of the property insurance market. We’ll assess your unique needs and recommend the right types and levels of cover for you.
- Access to a variety of options – we work with multiple insurance companies and have access to a wide range of products and policies, giving you access to a broader selection of coverage. Additional offerings include Directors & Officers Insurance, Terrorism Insurance and property valuation services.
- Time and effort savings – shopping for insurance can be time-consuming and complex. We’ll do the legwork for you by comparing policies, negotiating terms and handling administrative tasks.
- Customised solutions – we’ll take time to understand your situation and recommend policies that align with your needs.
- Risk assessment – we can conduct risk assessments to identify potential vulnerabilities and areas where coverage is needed.
- Claims assistance – in the event of a claim, our in-house claims team can provide valuable support by ensuring efficiency and fair compensation. As brokers we can act as intermediaries between you and the insurance company, advocating on your behalf.
- Cost savings – while we are paid a commission by the insurance companies, we can often negotiate better rates and terms on your behalf.
- Personalised service – our team of experts are always available to answer questions and address your concerns. We can provide ongoing assistance as your needs evolve, ensuring that your cover remains relevant and up to date.
- Compliance and legal requirements – we’re knowledgeable about legal requirements and compliance issues related to property insurance and maintenance. We can help you stay in line with regulations and make sure you meet any legal obligations.
- Peace of mind – knowing that you have a specialist property broker advocating for your insurance needs can provide peace of mind. You can trust that your coverage is appropriate and that someone is looking out for your best interests.
Why does an insurance broker earn commission?
Insurance brokers earn commission for their services in facilitating the purchase of insurance policies. This commission is typically paid by the insurance company with which the broker places the policy, and it is built into the pricing of the contract.
Commission is the main source of income a broker gets from arranging your insurance policy. Clients can benefit from the expertise, market access and personalised support provided by brokers.
Can I go to the insurer directly?
Yes, you can go directly to an insurance company to purchase a policy without involving a broker or intermediary, however not all insurers offer cover directly, especially for flats. There are some key points to consider when buying insurance directly:
- Limited comparison – when purchasing directly, you only have access to the products offered by that particular insurer. You may not have the opportunity to compare a wide range of policies from multiple insurance companies, as you would with a broker.
- Self-Service – when buying directly, you may need to navigate the insurance process on your own, from researching cover options to completing the application and managing your policy. Customer service representatives can assist, but it’s generally a self-service process.
- Claims handling – while you will likely have access to the insurer’s claims team, they cannot act independently of the insurer, unlike the claims team of a broker.
How is the commission calculated?
An insurance broker’s commission is calculated as a percentage of the premium you pay for your insurance policy. This commission is typically paid by the insurance company that provides the policy and is included in the overall cost of the insurance.
It’s essential to understand that the commission the broker receives doesn’t directly impact the cost of your insurance. In other words, you won’t pay less for the same policy by going directly to the insurance company. The premium you pay is the same whether you purchase the policy through a broker or directly from the insurer.
Brokers have a duty to act in your best interests, and our insurance recommendations will always be based on what suits your specific needs, not which policy pays the best commission.
Does the multi-occupancy Buildings Insurance legislation affect every insurance policy?
No, only those for multi-occupancy buildings such as blocks of flats and houses converted into apartments.
What if I used a different insurance broker?
Using a different insurance broker may or may not lead to a better price on your property insurance. The cost of insurance premiums depends on several factors, including the type of
property, the level of coverage, your location, your insurance history, and various risk factors. Here are some important things to consider:
- Broker Expertise: Different brokers have varying levels of expertise and experience. An experienced property insurance broker, like Lansdown, will be more adept at finding cost-effective solutions and ensuring you receive all available discounts.
- Insurance Market: The market can fluctuate due to various factors, such as natural disasters, economic conditions, and changes in underwriting practices. Insurance rates may change over time, regardless of your broker.
- Broker Relationships: Insurance brokers often have relationships with multiple insurers. Their ability to negotiate terms and rates may vary, so switching brokers could lead to different negotiations and potentially different pricing. Here at Lansdown, we have longstanding relationships with our insurers, which enables us to get you the most suitable cover and price.
We are able to provide flexible policies to suit individual client needs and provide advice on what cover is needed. For more information call the team on 01242 524498.