By Yannis Kotras, Deputy Editor
Back in February of this year, insurance times reported on the issue of insurance brokers operating in the multifamily insurance market paying secret commissions to property managers and freeholders, noting that those in power appear to be taking their time with this practice.
At the time, Secretary of State Michael Gove for Level Up, Housing and Communities banned the practice and suggested moving toward “eliminating unusually high brokerage fees” in the sector.
This week (July 12, 2023), a subcommittee of the House Finance Select Committee obtained evidence to investigate multi-occupancy building insurance and fees, a move by the government to end the practice. began in earnest. Those who presented evidence to the commission included Johnny Timpson of the Financial Services Consumer Commission, Anthony Esshen of Leasehold Advisory Services, Sheldon Mills and Matt Bruys of FCA. Mr.
Mr Mills, FCA’s executive director of consumer and competition, and Mr Bruyce, FCA’s general manager of property and casualty insurance, both told the commission that they were personally surprised by the level of one of the largest commissions being paid. Brokers need to be evaluated, he added. Evaluate the value of the services you provide within the value chain to ensure fair value is provided to leaseholders.
However, despite claims that regulators are addressing the issue, they should be more transparent to lessees and encourage companies to recommend insurance to property managers and freeholders based on fee amounts. Leasehold groups said they have plans to ban it. insurance times He said the examination of the evidence was “infuriating to watch.”
Harry Scofin, co-founder of the tenancy advocacy group Commonhold Now, said: “The FCA’s multifamily insurance reform proposal is timid, with insurers and brokers paying fees and commissions to freeholders and management agents. We do not have a provision that completely prohibits it.”
“Landholders don’t want to know how much they can get scammed. They just don’t want to be scammed in the first place.”
With the government’s current focus on this area of the insurance sector, we can expect to see a flurry of investigations and commissions for some time to come.
But that is no reason for brokers and insurers to continue to be complicit in overcharging leaseholders through unreasonably high service fees.
While it is true that the majority of players in the building insurance market are doing the right thing considering fair value in accordance with the upcoming consumer tax obligations, those that are not are undermining government scrutiny of the sector. ing. Who can say where government intervention will end now that they have an interest?
It would be much better for everyone in the insurance industry to be able to effectively self-regulate, demonstrate good practices to governments, and avoid unfair advantage.
But now the ship seems to have sailed really well.