The Financial Conduct Authority (FCA) has confirmed the new rules that are aimed at supporting residential leaseholders in the multi-occupancy buildings insurance market, and the Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA) have been quick to react.
The reforms, which will take effect on December 31, will mandate insurance firms to treat residential leaseholders as customers when designing products. Insurers will be required to ensure that policies provide fair value to leaseholders, who must also be informed of pricing details such as any commission paid.
Additionally, recommending an insurance policy based on commission or remuneration levels will be against the new regulations.
“Insurance firms must now act in leaseholders’ best interests and ensure that their policies provide fair value,” FCA executive director of consumers and competition Sheldon Mills said in a release. “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.”
In response to the upcoming changes, ABI general insurance director Mervyn Skeet cited a challenge.
Skeet commented: “Leaseholders deserve greater transparency on the details of their buildings insurance policy, and so we welcome this confirmation from the FCA of the final rules.
“We recognise the acute financial and emotional strain that is being placed on leaseholders and want to play our part in helping to reduce insurance costs while affected buildings await work to resolve fire safety issues. This is an important step, but it remains the case that the ultimate solution to the problem is to remediate buildings to a standard that saves both lives and property, and we urge government to progress this urgently.
“Producing a new range of clear, accurate, and tailored consumer communications within a three-month implementation period is very challenging, but our members will do everything they can to introduce these changes within the required deadline.”
He added that the ABI, by continuing to work with members and the FCA, will ensure that the process is implemented as smoothly as possible without losing its focus on delivering the risk-sharing facility.
As for BIBA, the trade body published a six-page position paper detailing its response to the rule changes.
In a separate statement, BIBA said: “In particular, we welcome the introduction of the new policy stakeholder status for leaseholders and the increased transparency requirements around insurance arrangements and remuneration. The [FCA’s Policy] Statement coincides with extensive new work BIBA has commissioned to help members better demonstrate fair value for the activities and services they provide in this sector…
“It also coincides with a new member pledge that BIBA members are being asked to sign up to which makes important commitments around remuneration practices for residential buildings over 11m in height that have material fire safety issues.
“Finally, we are at an advanced stage in our work with the ABI and McGill & Partners to launch a new fire safety reinsurance facility later this year which will allow a group of leading insurers to deploy more risk capacity for medium and high-rise residential buildings that have material fire safety issues.”
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