| Link(s): | https://www.fca.org.uk/publication/correspondence/multi-occupancy-buildings-insurance-letter.pdf |
Context
The FCA has published a letter it has sent to the Secretary of State for Levelling Up, Housing and Communities, Michael Gove. In January 2022 Mr Gove wrote to the FCA regarding reports of rising costs faced by residential leaseholders and other affected property owners across the United Kingdom in the wake of the Grenfell tragedy.
Mr Gove asked the FCA to review the way the market for multi-occupancy buildings insurance operates, in order to:
- Shed light on the underlying causes of year-on-year price increases; and
- Assess the causes of the marked restriction in coverage available for multiple-occupancy buildings
He also asked the FCA to make practical recommendations for measures that industry, government and regulators could take to achieve the goal of widely available and affordable cover for leaseholders.
Key points to note
- In the letter the FCA says it has issued two data requests to a range of insurers and intermediaries to capture appropriate historical data from 1st July 2016 onwards and had a series of meetings with representatives from insurers, brokers, and through their respective trade bodies. The intention is to hold further in-depth workshops with the industry, whilst carrying out detailed analysis of pricing, fair value and looking for potentially unfair practices through both quantitative and qualitative analysis.
- Based on the current understanding of the market the FCA has considered the drivers of harm which could be impacting leaseholders. Price increases could be a result of insurers shying away from bidding for new business of multi-occupancy buildings, or charging particularly high premiums to insure them, due to perceived issues with building safety and quality. There are concerns that factors such as high commission paid to brokers and property managers, and a lack of competitive pressure on prices, could also be leading to harm.
- As well as identifying potential harms work has begun on developing initial options for ways any harms identified can be addressed. For example, whether the FCA could use powers to improve the information given to leaseholders about their insurance, or potentially to limit the commissions which are paid to brokers. Consideration is also being given to the scope of the FCA’s powers and whether some of the identified harms would be better addressed through action by others (such as industry-led initiatives or Government intervention).
Next actions
None – for information and awareness