Multi-occupancy buildings insurance – FCA Rules

You may be aware of the recent regulatory developments in the multi-occupancy building insurance market, particularly the changes outlined in the FCA Final Rules.

The FCA reports from September 2022 and April 2023 identified significant issues in the multi-occupancy building insurance market, leading to adverse outcomes for leaseholders. As a response, the FCA has directed insurance market participants in these areas to address their findings and implement necessary changes by 31 December 2023.

Summary of key issues and outcomes required by 31/12/2023

Current harms / poor outcomes

• Leaseholders pay insurance charges without influence over policy selection or price.
• Lack of transparency makes it challenging for leaseholders to challenge incurred costs.
• Some remuneration practices, including high commissions, were identified as excessive.
• Issues causing distress and impacting the mental health of leaseholders.

Outcomes required by 31/12/2023

• Increase transparency for leaseholders.
• Ensure insurance products align with the needs and interests of leaseholders.
• Price products fairly and ensure remuneration practices do not lead to poor outcomes.

Changes introduced

• Clarification of ‘leaseholder’ definition to cover residential leaseholders only.
• New definition for ‘policy stakeholder’ to exclude commercial entities.
• Guidance on remuneration disclosure, covering all forms of remuneration.
• Provision for estimating premium breakdown if an exact figure is unavailable.

Remuneration and customer’s best interests

• Prohibition on arrangements providing incentives to recommend specific contracts.
• What information must be disclosed
• Summary of cover, pricing, remuneration, placement and conflicts of interest information.

Production and provision of information

• Responsibilities outlined for insurers and insurance intermediaries in providing required information.

For a more detailed review of the changes, please refer to this document.

Our approach

Our product development processes and value assessments already consider the needs of Leaseholders. Therefore, the statements in our distributor product guides will remain unaltered.

To fulfil our duty in line with the new regulatory requirements, we will be issuing a comprehensive summary of the information required for every property owner risk where the broker requests leaseholder information to be supplied.

This proactive approach ensures transparency and compliance with the FCA Final Rules.

Should you have any specific concerns or queries regarding this process, please do not hesitate to contact us.