Like him or loathe him, and he is a man who divides opinion, Michael Gove does get stuff done, and so it has been proven regarding reversing the spiralling cost of insurance for blocks of flats!
So why did Gove get involved in the first place? After the Grenfell tragedy and the scandal of cladding unsuitable for use in multi-storey buildings, insurers, not unreasonably hiked the cost of insuring unsafe buildings. This causes a huge problem for the leaseholders stuck in buildings with flammable cladding – realistically this will only be resolved when the cladding is removed. With thousands of buildings affected, lack of capacity to carry out works and complications around liability, this is going to take time – until then many people will be trapped paying sky-high premiums and unable to sell their flats.
But the problem went much wider than buildings with unsuitable cladding and seems to have influenced the appetite of insurers for multi-storey buildings in general, especially if any form of cladding exists (Even when the cladding is approved).
Understanding Block of Flats Insurance
Although it was the spiking insurance costs associated with cladding that piqued Gove’s interest what really lit his fire was discovering that in many cases a very cosy relationship between insurance brokers and managing agents was not serving the leaseholders’ best interests. It’s an unusual scenario with blocks of flats that as a leaseholder your insurance is generally bought on your behalf by the managing agent. Over the years it has become common practice for brokers and agents to share commissions. This in itself, is not a problem, the managing agents add lots of value providing key information for the insurers, acting as a triage with claims, and coordinating repairs. The problem arose when these payments were out of all proportion to the services provided and here it had the impact of further inflating the premiums already affected by post Grenfell sentiment.
Fortunately, insurance is a highly regulated industry and Gove charged the FCA, with making proposals to end the practices leading to poor outcomes for leaseholders. Under the proposals, leaseholders would be defined as customers of buildings insurance. The rule changes would explicitly require insurance firms to act in leaseholders’ best interests, and bar firms from recommending a policy based on commission or remuneration levels. Insurers and brokers would also need to provide more information about insurance policies to leaseholders, including details of any commission paid. It remains to be seen whether this will achieve the changes that Gove and leaseholders desire but early signs are that it’s having some impact. Gove being Gove, you can be pretty confident he will be back with tougher measures if it doesn’t!
Block of Flats Insurance for leaseholders
What can you do as a leaseholder? Firstly, be aware of your enhanced rights – you need to be treated as a customer of the insurer not a third party as previously. Ask about commissions, brokers and agents need to be remunerated for their work but are the charges reasonable and proportionate? Finally, choose or ask your managing agent to select a broker like Pelican. A proactive broker goes the extra mile in terms of obtaining construction details and any factors that help mitigate risk. Insurers hate unknowns and the better they understand a risk the more competitive they will be when setting premiums.
If you are a leaseholder or managing agent and are looking for a better service and a broker that works harder on your behalf, please get in touch with our friendly and very knowledgeable team here at Pelican at office@pelicaninsured.co.uk or call 0333 091 2730.
