Context
Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, has published a letter to the Financial Conduct Authority (FCA) responding to their interim findings from a review into the buildings insurance market for multiple-occupancy buildings. In reality the letter simply acknowledges and welcomes the FCA’s approach and focus, and indicates support if the FCA feels that legislative change is required in relation to the FCA’s perimeter. However, the Secretary of State has noted the FCA’s request for government to consider specific statutory powers on remuneration to assist the FCA in implementation of restrictions on commissions. If this is carried forward, we are perhaps seeing the earliest developments in regulatory intervention in commission / remuneration levels in the general insurance markets.
Key points to note
- Mr Gove welcomed the FCA’s focus on potential harms, and re-stated his concerns regarding the affordability and availability of insurance for leaseholders in flats with fire safety issues.
- Mr Gove stated that “it is neither fair nor decent that innocent leaseholders should be landed with bills they cannot afford as a result of problems they did not cause.” It should perhaps be noted that the insurers, insurance brokers and property managing agent communities also did not cause the underlying issues of fire safety issues and other emerging shortcomings in the construction of multi-occupancy buildings; it is perhaps these issues, primarily, that are the root cause of increased prices.
- In acknowledging the FCA’s perception that a potential harm is a lack of competition between insurers of multiple-occupancy buildings, Mr Gove has stated that he would like to understand what can be done to encourage a new entrants into this market. He has also asked that the FCA continues to liaise with the Competition and Markets Authority (CMA) in considering remedies to the current market environment.
- In seeking to “review how all actors in the insurance marketplace have contributed to high premiums for leaseholders”, Mr Gove has stated that he welcomes the work that the FCA is considering to re-align incentives for insurance brokers, freeholders and managing agents. This is perhaps an overdue exercise. In this regard, Mr Gove has noted the FCA’s request for government to consider specific statutory powers on remuneration to assist the FCA in implementation of restrictions on commissions.
Next actions
- None – for information and awareness.