March 4, 2024

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UK insurance brokers back move to cut costs for leaseholders

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Five UK insurance broking groups have signed up to a pledge to stop sharing buildings insurance commissions with landlords and to cap their own fees, in a move the government said would significantly reduce costs for thousands of leaseholders.

Leaseholders in blocks of flats pay towards insurance policies covering the buildings and their contents, but have no control over which insurers are selected or the intermediary costs paid to brokers — which are often shared with the landlord, freeholder or managing agent. 

The five groups — Willis Towers Watson, Lockton, Brown & Brown, Bridge and PIB — have agreed with the government to end the practice of sharing their commissions with these third parties and to cap the proportion of the premiums that they take at 15 per cent.

Lee Rowley, minister for building safety, welcomed the decision of the 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,” he said.

The move comes after the UK financial regulator said intermediary fees paid by leaseholders as part of their buildings insurance, which reach as high as 62 per cent of the premiums, to be “disproportionate” in a recent report.

Campaigners fighting for insurance transparency in the courts have targeted intermediary fees shared with third parties as a key aspect of outsized insurance costs, especially for those paying more for cover due to fire-safety issues. A London tribunal in December slammed the commission payments demanded from residents of one block of flats and ruled they had been overcharged by £1.6mn.

The government pledged in January to ban managing agents, landlords and freeholders from taking commissions on…

2023-10-29 09:13:48

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