New Property Insurance Regulations Fuelling Broker’s Business

The opening up of the property market, so as to encourage more transparency for leaseholders requiring property insurance solutions, has led to a boom in demand for property quotations from commercial insurance broker, Gauntlet Group.

The Financial Conduct Authority (FCA) introduced new reforms, at the end of 2023, which now prevent brokers from paying unwarranted commissions to property managing agents or landlords, just to secure their insurance business.

The FCA felt compelled to step in, after property insurance premiums began to rocket after the Grenfell Tower tragedy, and when the supply of insurance protection for some buildings began to shrink.  

The FCA also found that insurer commission levels rose by 40% in the three years between January 2019 and September 2022.[i]  With commissions being paid to those in charge of arranging leaseholders’ property protection, commissions were abnormally high, with both the broker and the agent or landlord taking a cut.

Now, the FCA has specified that a property managing agent or landlord cannot recommend an insurance policy based on commission or remuneration levels attached to it.  It is essential to provide fair value to leaseholders and for the leaseholders to be informed exactly why an insurance policy is being proposed, what value they will gain from it and what the precise pricing breakdown behind it is.

The proposal presented to leaseholders, in language they understand, has to take into account factors such as cover and cost, policy exclusions, excesses, limitations and conditions.

This new situation is leading property managing agents and landlords to have to explore non-traditional routes for property insurance, beyond the brokers who were paying them commission to recommend a certain policy.  As part of this process, Gauntlet Group is experiencing a boom in demand for property insurance quotations, for both multi-occupancy buildings  and other buildings occupied by leaseholders.

Although based in Yorkshire, the broker is securing new clients in the UK-wide property sector, thanks to its insurer relationships and access to schemes.

Notably, although the inspiration for the FCA’s action – supported by the Department for Levelling Up, Housing and Communities – was insurance provision for blocks of flats, the new regulations apply to any property that is a UK leasehold dwelling.  The only exceptions are those let to businesses and those in which tenants pay general rent and do not receive an insurance figure as an itemised cost.

“Property owners and agents are having to shop around for better solutions for their leaseholders – ones which epitomise and represent the ‘fair value’ on which the FCA is insisting,” says Gauntlet Group’s managing director, Roger Gaunt.  “As we have such great market reach and buying power, these intermediaries are discovering we can offer their leaseholders not just competitively priced policies but also property insurance policies that offer better coverage than they may have enjoyed previously.”

With the commission shroud lifted from policies, a closer examination of the details is revealing that many were not providing good value for money.  These property insurance cover options do not stand up to scrutiny, when compared to other property insurance policies that offer more protection or come with lower premiums.  The beneficiaries of this are the leaseholders whose agents and landlords are approaching Gauntlet Group, to assess what the property insurance options are.

“We are already helping to deliver the fair value the FCA envisioned and this is benefiting those leaseholders who had been paying over the odds for their insurance protection, simply because so much commission was factored into the pricing,” says Roger Gaunt.

“The new regulations are extremely advantageous for leaseholders, if their property managing agents and landlords embrace the ethos behind them and actively shop around for better options for their leaseholders.”

To discover what Gauntlet Group’s head office broking team – or nationwide network of local brokers – could offer to your leaseholders, call 0113 244 8686 or select a local broker from the map at www.gauntletgroup.com

[i] https://protectionreporter.co.uk/fca-aims-to-protect-leaseholders-with-new-measures-for-multi-occupancy-buildings-insurance-market.html

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Editors notes

Gauntlet is a Leeds-based commercial insurance broker and Appointed Representative network principal with ARs located nationwide. Gauntlet celebrated its 25th anniversary in 2019, along with the 10th anniversary of its Gauntlet Enterprise network, The broker handles all types of commercial insurance but has a particular specialism in passenger and road transport.