The Financial Conduct Authority has published a review which corroborates and adds to the findings of its review in September 2022 of multi-occupancy buildings insurance. In its latest report the FCA has found that absolute levels of remuneration, including commissions, rose by nearly 40 per cent between 2019 and 2022 and that the 16 brokers in its sample paid over £80m of insurance commission to other parties (including freeholders and property managing agents) during the period. Additionally, most of the brokers in the sample did not give adequate evidence to show that they deliver fair value consistently for multi-occupancy buildings products. The FCA says that this emphasises the potential harm to leaseholders and the need for brokers to do significant work to ensure that fair value is consistently delivered. The findings, according to the FCA, also evidence the need for policy interventions by the Authority set out in a consultation paper published alongside the latest review.
On the same day the DLUHC published two letters from Housing Secretary Michael Gove. In a letter to the Chief Executive of the FCA, Mr Gove expressed ‘outrage’ at the findings of the review. He said that the review ‘strengthens my resolve to ban property managing agents, landlords and freeholders taking commissions on buildings insurance and replace with transparent fees’. He added: ‘I believe the FCA should take immediate enforcement action against those brokers and managing agents that cannot demonstrate their commissions represent fair value, where they are regulated by the FCA and by RICS.’
In a letter to the Chief Executive of the British Insurance Brokers’ Association, Mr Gove wrote: ‘I have already made clear that I will act to ban commissions on insurance contracts. If satisfactory proposals from the sector are not forthcoming, I will have to consider what other measures may be appropriate to ensure consumers are protected.’