Insurers will be forced to act in the best interests of people who own flats in apartment blocks and other leaseholders under new rules from the City watchdog.
The Financial Conduct Authority (FCA) said that from the start of the new year, insurance firms will have to treat leaseholders as customers when designing products.
They will also be banned from recommending insurance policies based on the level of commission or remuneration they can get.
It comes after a letter from the watchdog in January 2022 which told companies to take leaseholders into consideration, and said that it had seen significant shortcoming from some brokers.
Typical commissions ranged from 30% to 49%, the FCA said, with some as high as 62%.
Insurance firms must now act in leaseholders’ best interests and ensure that their policies provide fair value— Sheldon Mills, FCA
Later that year a report from the FCA found that insurance premiums had risen significantly for leasehold buildings after the Grenfell fire, which left 72 people dead. The rises were particularly large for high and mid-rise buildings.
The new rules mean that insurers will have to make sure they are providing fair value to leaseholders and give them important information and their policy and its pricing. This should include the details of any commission paid, the FCA said.
“Insurance firms must now act in leaseholders’ best interests and ensure that their policies provide fair value,” said Sheldon Mills, executive director of consumers and competition.
“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.”
The FCA has previously said that there are many issues highlighted by the Grenfell fire which are outside its remit.
It cannot take into account issues driven by construction issues or involving companies it does not regulate.
