Dear Secretary of State | Release Date: 10th May 2022
To read a longer summary of this Dear Secretary of State letter, click here.
To access the original FCA document, clear here.
Short Summary
In a detailed response to the Secretary of State’s request, the FCA’s Executive Director, Sheldon Mills, outlines the ongoing review of the multi-occupancy building insurance market, prompted by concerns over rising insurance costs for residential leaseholders following the Grenfell tragedy. The letter highlights the FCA’s efforts to gather comprehensive data from insurers and intermediaries since July 2016 to understand pricing dynamics and market practices that might be contributing to increased costs and restricted coverage.
The FCA’s investigation focuses on three main areas: data gathering and industry engagement, analysis of potential market harms, and exploration of possible interventions. Initial findings suggest that price increases could be due to insurers withdrawing from the market or charging high premiums because of perceived risks associated with building safety. Additionally, concerns about high commissions paid to brokers and a lack of competitive pressure were identified as possible drivers of these market issues.
The FCA is considering several regulatory interventions to address these harms. These include improving information provided to leaseholders, potentially regulating commissions paid to brokers, and extending existing consumer protection rules to include leaseholders directly.
The review’s outcome and potential recommendations are still in development, with further industry engagement planned. The final report, expected within a six-month period from the initial request, aims to offer practical measures for industry, government, and regulators to facilitate affordable and accessible insurance coverage for leaseholders.
Key Take-aways for Affected Readers:
Leaseholders concerned about rising insurance costs should stay informed about the FCA’s review and upcoming report, which may lead to changes in the market and potentially beneficial regulatory interventions. Engaging with leaseholder associations and staying updated on government and FCA announcements could provide further avenues for influence and advocacy.