UK’s new housing minister vows to crack down on ‘immoral’ insurance deals
The UK’s new housing minister has vowed to crack down on “immoral” practices in the insurance sector that “drive up prices for consumers,” after tower block leaseholders were hit with surging premiums in the wake of the Grenfell tower disaster.
In a comment piece in The Telegraph, Housing secretary Simon Clarke said his department will work with the UK’s financial watchdog to end “appalling practices” in the insurance industry, such as the sharing of commissions between brokers and managing agents or freeholders.
Critics have claimed the practice of sharing commissions creates an incentive for freeholders to negotiate higher insurance premiums, in order to collect larger payouts for themselves, with a view to passing the costs onto leaseholders.
In January, the UK’s former housing secretary Michael Gove raised concerns that some leaseholders in mid- and high-rise buildings had seen their insurance premiums double in the wake of the 2017 Grenfell tower disaster.
A review by the UK’s Financial Conduct Authority (FCA) revealed premiums for multi-occupancy buildings more than doubled from average rates of £6,800 in 2016 to £15,300 in 2021.
Commissions paid out to brokers for policies covering buildings with flammable cladding more than tripled from £1,300 in 2016 to £4,690 in 2021, as brokers on average took 30 per cent cuts, the FCA review showed.