Here at Gallagher we welcomed September’s publication of the Financial Conduct Authority’ final rules for multi-occupancy buildings insurance, Policy Statement PS23/14.
We are now ready to make sure you can take advantage of this new opportunity to give your customers confidence in the services you provide.
The new rules should go some way to diminish fears that leaseholders in multi-occupancy buildings (blocks of flats) may not be getting the cover that meets their needs or value for money.
By shining a light on the way a particular policy is chosen and how fees and commission are earned and shared, you can give leaseholders reassurance that they are being treated fairly.
All you need to do to benefit from the goodwill that the new rules will generate, is to simply share the Leaseholder Disclosure document with the service charge payers. Where possible, we will aim to provide this to you within 30 days of inception..
The Leaseholder Disclosure document will include:
- a summary of cover;
- the policy premium;
- information on how the policy was chosen e.g. did we obtain multiple quotes or work with a single provider before recommending a policy, and why we chose that approach for this specific block;
- our direct remuneration as brokers.
- any remuneration (taken from our direct remuneration) paid to third parties – typically this will be commission paid to you as managing agents; and
- our direct remuneration for services such as delegated underwriting, a service insurers allow us to perform as trusted broker partners and which can streamline processes for you.
Why are the new disclosure rules needed?
The new rules detailed in the FCA’s Policy Statement PS23/14 were published almost a year to the day after the Authority published its review on the provision of insurance for residential leasehold properties.
That review had been requested by Michael Gove, Secretary of State for Levelling Up, Housing and Communities and, in a nutshell, it found some serious issues with how some insurance is priced and how commissions are shared, all against a backdrop of rising premiums.
So now we have new rules that apply to everyone, based on transparency which we, as one of the world’s most ethical companies, believe is good for customer relations and good for business too.
Agents’ commission
Under the current law, we see no fundamental issue with paying a fair commission to managing agents as long as the policy purchased is truly appropriate for the block and represents fair value to the leaseholder(s).
You spend a significant amount of time in helping to arrange insurance, time that would otherwise likely have to be paid for out of service charges.
We believe leaseholders will understand that if it is explained to them, and they can see that you are working with appropriate brokers and insurers.
That said, the Kings’ Speech in November 20231 included support of the proposed Leasehold and Freehold Bill and the government’s intention to ban opaque and excessive buildings insurance commissions and replacing with fair and transparent handling fees2.
Meanwhile, be assured we will be keeping a close eye on the market and keep you informed of any developments.
Should you have any queries do not hesitate to contact your Account Director or Account Executive.
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