The voluntary pledge follows a Financial Conduct Authority (FCA) investigation that found that between 2019 and 2021 brokers took real-world retained commissions of £159m on insurance for multiple-occupancy buildings, an increase of 64%.
Signees have pledged to end the practice of sharing commissions with managing agents, landlords and freeholders. They are also promising to have a cap of 15% on the proportion of the premium that brokers take to compensate for their work.
Graeme Trudgill, chief executive of the British Insurance Brokers’ Association (BIBA), said: “BIBA has been working closely with DLUHC [the Department for Levelling Up, Housing and Communities] and our members on this pledge and we support its publication, which is a positive development.
“We will continue to work with relevant members to highlight how important this pledge is in the context of multi-occupancy properties with fire safety issues.”
Robert Poole, group block management director at Glide Property Management, Leaders Romans Group, welcomed the pledge, but added: “I would also like to see the government lead by example in reducing their insurance premium tax from 12%, which again would help leaseholders.”
The pledge has so far been signed by Lockton, Bridge Insurance Brokers, Brown & Brown Insurance Brokers, PIB Group Insurance Brokers and Willis.
“I strongly welcome the decision of these brokers to step up and demonstrate their willingness to do more on bringing premiums down,” said minister for building safety Lee Rowley. “These brokers are to be congratulated on their decision; we now need to see further action from others in the broader insurance and broker industry to accompany it.”
Matt Brewis, Director, Insurance, said: “We welcome the decision of these five brokers to sign up to the pledge to change their practices for leasehold buildings insurance, and we’d encourage others in this market to follow their example.
“Our rule changes explicitly require insurance firms to provide policy information to leaseholders and will ban firms from recommending policies based on the levels of commission paid.
“We expect all brokers to immediately stop paying commissions to third parties where they cannot justify this under our fair value rules.”
An Association of British Insurers spokesperson said: “This voluntary pledge between five brokers and the Government is a welcome step to support leaseholders in advance of the new legislation which is expected to be announced imminently. Our work to establish a risk sharing facility is progressing at pace and we will update on launch plans as soon as possible.”
Alongside the pledge, Martin Boyd, current chair of campaign group the Leasehold Knowledge Partnership, has been named the new chair of LEASE – the government-funded body that provides free information and advice to leaseholders.
He said: “After years of campaigning for leasehold and commonhold reform with the Leasehold Knowledge Partnership, it is a privilege to be offered this role as chair of LEASE at this critical point in the transformation of our housing system.
“The secretary of state has asked that I expand the existing service offered by LEASE and add two new roles.
“We will create systems to give robust and regular insights to DLUHC and the Welsh government on the issues that leaseholders and park homeowners are facing, and we will ensure that LEASE works closely with leasehold and park homeowner stakeholder groups.”
The moves follow housing minister Rachel Maclean’s confirmation of plans to bring forward a bill to abolish leaseholds on newly built houses, set to be announced in the King’s Speech on 7 November.
The proposals, which do not ban new leasehold flats, are anticipated to be announced alongside plans to cap all ground rents on existing leasehold properties to a peppercorn rate and laws to change the standard contract lease extension from 90 to 990 years.
Source: Residential - propertyweek.com
