Leaseholders in blocks of flats pay towards insurance policies covering the buildings and their contents yet have no control over the panel insurers 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 on buildings over 11 metres in height, with known fire-safety issues, 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”.
He said: “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.”
‘Disproportionate’
The move comes after the UK financial regulator branded intermediary fees paid by leaseholders as part of their buildings insurance, which reach as high as 62 per cent of the premiums, “disproportionate” in a recent report.
A London tribunal in December slammed the commission payments demanded from residents of one block of flats and ruled they had been overcharged by £1.6m.
The government pledged in January to ban managing agents, landlords and freeholders from taking commissions on buildings insurance and the measure is expected to be part of a leasehold reform bill to be unveiled in the King’s Speech on November 7, according to FT sources. Officials are hopeful the ban will be come into effect by the general election, expected next year.
The bill is targeted to end leaseholds on all new-build houses, a longstanding Conservative pledge and includes a number of other measures to help leaseholders, who are often liable for other extra costs.
These include capping existing ground rents at a “peppercorn” rate. In addition, the bill will allow the extension of leases from the current 90 years to 990 years and scrap a requirement for leaseholders to have lived at the property for two years before they can request one, according to sources.
The bill may also extend leaseholders’ “right to manage” their property by hiring or firing property managers, according to a report in The Sunday Times.
