The package of potential remedies seeks to give leaseholders greater protections
The Financial Conduct Authority (FCA) has provided a set of recommendations and other potential remedies designed to give leaseholders greater protections from insurance costs that have increased considerably since the Grenfell tragedy.
The FCA was asked to carry out a review into the market for multiple-occupancy residential buildings insurance and explore ways to provide better value cover for leaseholders.
The review found there has been a reduction in the supply of insurance for multi-occupancy residential buildings between 2016 and 2021, with some insurers leaving the market, and reduced appetite to take on new business among others. This appears to be the result of the falling profitability of this line of business, the regulator said.
“Since the Grenfell tragedy, hundreds of thousands of leaseholders have had to endure the difficulties of living in buildings with known fire safety issues, and these problems have been made worse by increases in the cost of their insurance,” Sheldon Mills, executive director of consumers and competition at the FCA, said. “We will consult on measures to improve transparency for leaseholders about the price of their insurance and how leaseholders can be given greater protection.
“We expect the insurance industry to work quickly with us and the government to develop solutions to this issue, including developing pooling arrangements and reducing commission, that will make affordable insurance cover more widely available.”
Data from 2016 to 2021 suggests that the average price of premiums for multi-occupancy residential buildings has more than doubled over this period, posting a 125% increase from £6,800 to £15,300.
The package of potential remedies suggested by the FCA seeks to give leaseholders greater protections and improved information about their insurance costs, as well as improve the affordability and availability of insurance.
These recommendations and other potential remedies include the creation of a cross industry pool to limit the risk to individual insurers posed by certain buildings affected by flammable cladding or other material fire safety risks, aimed at reducing the price of insurance for these buildings; the increase in the amount and transparency of information available to leaseholders on the pricing of the insurance they are paying for; making it easier for leaseholders to challenge high insurance costs passed on to them; and making leaseholders ‘customers’ of buildings insurance.
The FCA said it will provide an update on progress towards potential remedies in six months.