Many of you may have heard about the new requirements being introduced regarding multi-occupancy building insurance. Since the tragic fire at Grenfell Tower in 2017, there have been numerous concerns about insuring high-rise buildings. Following this, the Financial Conduct Authority conducted some research alongside several other bodies, to address this, and several other such concerns.
What did they find?
What quickly became clear was the lack of care and options available to leaseholders. For example, because lessees are not the direct customers of insurance brokers, there didn’t appear to be a set of rules or regulations in place to cater for their needs.
Questions were also raised about whether they were receiving value for money despite many paying an insurance premium – while complicated remuneration models meant some Property Managing Agents and freeholders were receiving money paid by leaseholders, without a link to the actual work they were carrying out.
The Financial Conduct Authority (FCA) believe that financial markets must be honest, competitive and fair – so that consumers get a fair deal, and work to ensure these markets operate well for individuals and businesses.
Their focus is on reducing and preventing serious harm, setting higher standards, and promoting competition and positive change.
When did the new requirements start?
The new FCA requirements on multi-occupancy building insurance started on the 31st of December 2023, and have wide-reaching implications for all parties involved in leasehold insurance, including insurers and brokers.
The findings from the reports forced the FCA to conclude that there were ‘significant issues in the multi-occupancy building market, which are leading to poor outcomes for leaseholders.’
The published FCA statement can be found here, where it also includes final rules and guidance.
The changes will impact or be of interest to regulated insurers and intermediaries, industry groups and trade bodies, unregulated firms involved with multi-occupancy buildings (such as property managing agents), freeholder owners who are landlords of multi-occupancy buildings, leaseholder representative groups, and individual leaseholders.
What’s changing?
In short, new disclosure documents will need to be produced by brokers and insurers.
One of the most significant new requirements is the introduction of ICOBS 6A.7 and the new set of disclosure rules.
Here, it is a requirement that several disclosures are prepared and sent to the customer, with an instruction to that customer (usually the property freeholder or PMA) to then provide the disclosed information to any leaseholder of the building, in relation to which the multi-occupancy building insurance contract provides cover.
The areas the disclosure refers to include, information surrounding conflicts of interest, a summary of the cover, pricing information, and placing and shopping around information.
Some of the additional guidance and rule changes concern Product Oversight and Governance (PROD) and the customers’ best interests.
For example, who is included in the term ‘customer’, considerations of whose interests must be considered in the fair value considerations of multi-occupancy buildings insurance contracts, and the scope of the assessment of value (including within the distribution chain, for manufacturers and distributors).
So, as you can see, there are some complex amendments but amendments that may require greater context and/or explanation.
If you have a question or query about anything we have discussed or want to know more? Get in touch with Edwards Insurance Brokers on enquiries@edwardsinsurance.co.uk or 01564 730900.