The government has agreed a pledge with five sector-leading insurance brokers, which could mean thousands of leaseholders in buildings with identified fire safety issues see a significant reduction in their insurance premiums.
Each broker is committing to stop the practice of sharing commissions with those parties who place or arrange buildings insurance, such as property 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 in arranging the insurance. The Financial Conduct Authority (FCA) report on broker remuneration found that this amount can be as high as 60% of the cost of the premium paid by leaseholders.
The FCA’s findings have strengthened the Government’s resolve to see a ban on the practice of sharing commissions, as announced by the Secretary of State for Levelling Up, Housing and Communities, Michael Gove, in January 2023. This pledge is an important step towards implementing that policy.
Minister for Building Safety, Lee Rowley, said:
“I strongly welcome the decision of these brokers to step up and demonstrate their willingness to do more on bringing premiums down.
“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.”
The brokers that have individually taken the voluntary decision to sign up to the pledge are: Lockton LLP, Bridge Insurance Brokers , Brown & Brown Insurance Brokers (UK) Limited, PIB Group Insurance Brokers/ St Giles, and Willis Limited (WTW).
The pledge will benefit leaseholders who are living in buildings over four storeys or 11m in height with identified fire safety defects, which have been made known their insurance brokers.
The brokers who have signed up to the pledge have also confirmed their commitment under new FCA rules, from 31 December 2023, to share information about the buildings insurance policy with leaseholders if requested.
These companies will act with immediate effect for new policies and the Government will monitor the adherence to and impact of the pledge.
Department officials stand ready to discuss the pledge with any relevant broker and expect to see the numbers of responsible brokers increase over coming weeks.