Regulator confirms leasehold buildings insurance reforms

The Financial Conduct Authority today confirmed a series of measures designed to protect beleaguered leaseholders in multi-occupancy buildings.

From the beginning of next year, insurers will be forced to act in leaseholders’ best interests, treating them as customers when designing new products.

Under the new rules, insurers will also be banned from recommending an insurance policy based on commission or remuneration levels, and they will be required to ensure that their insurance policies provide fair value to leaseholders and provide important information about their policy and its pricing, including the detail of any commission paid, for leaseholders.

Leasehold buildings insurance premiums have risen significantly since the Grenfell tragedy, with leaseholders facing substantially higher costs as well as poor value.

Sheldon Mills, executive director of consumers and competition, said: "Insurance firms must now act in leaseholders’ best interests and ensure that their policies provide fair value. Our reforms will help to strengthen the insurance market by providing new protections for leaseholders. We will not hesitate to take action if firms breach these rules."

The FCA expects brokers to immediately stop paying commission to third parties (including property managing agents and freeholders) where they do not have appropriate justification and evidence for doing so in line with our rules on fair value.

The Department for Levelling Up, Housing and Communities has also announced its intention to ban the payment or sharing of commissions with property managing agents, landlords and freeholders.

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