FCA to clamp down on rip-off building insurance commissions

21st Apr 2023 07:24

(Sharecast News) - The UK's financial watchdog has proposed new rules that will allow apartment leaseholders to claw back millions in rip-off insurance costs as part of a clampdown on scandalous overcharging by brokers working in conjunction with unscrupulous landlords.

An investigation into brokers found that a third of brokers had not produced enough evidence to justify fee rises of almost 40% between 2019 and 2022, the Financial Conduct Authority said in a report it commissioned into the practice

Brokers had passed on £80.7m in commission to third parties and were "often unable to articulate" what landlords were doing to justify the costs being passed on.

The proposals follow a review after 2017 Grenfell Tower fir in London which killed 72 people and led to massive rises in building insurance, becoming a growing scandal in the insurance industry.

Brokers have been told to immediately stop passing on part of their commission to the managing agent or freeholder of the building being covered if it did not comply with the watchdog's fair value rule.

The FCA published a consultation paper on its proposals alongside a review of 16 insurance brokers' sales to blocks of apartments between January 2019 and September 2022.

Leaseholders would have transparency on insurance costs and ability to challenge poor value under the FCA proposals.

"All these issues have caused considerable distress for many leaseholders, including on their mental health and wellbeing," the FCA said.

Reporting by Frank Prenesti for Sharecast.com