This comes ahead of the introduction of the Freehold and Leasehold (Reform) Bill, announced in the King’s Speech on 7 November 2023, which is expected to legislate for improvements to leaseholder rights and protections – including tackling excessive charges and setting standards for transparency.
Voluntary assurance of best practice
Each of the companies has signed up to an Insurance Broker Pledge which contains three commitments:
- To stop the practice of sharing commissions with the party that places or arranged buildings insurance
- To cap retained commission at a maximum of 15% of the total premium
- To disclose commissions to leaseholders in line with FCA regulations if requested, and to work with third parties to deliver transparency on fees to leaseholders
The brokers who have signed the Pledge are Lockton LLP, Bridge (FlatGuard a trading style of Bridge Insurance Brokers Limited), Brown & Brown Insurance Brokers (UK) Limited, PIB Group Insurance Brokers and St Giles and Willis Limited (WTW).
What this means for leaseholders
DHLUC states that reducing commission charges will result in a positive impact of the cost of insurance which freeholders pass on to leaseholders through service charges.
Leaseholders are encouraged to ask if their insurance is placed with a broker who is signed up to the Pledge and to request details of commissions being paid.
From 31 December 2023, changes to FCA regulations will give leaseholders the right to request a range of information about their policy from their broker.
Commission ban for agents expected
The FCA has already stated that brokers should immediately stop paying commissions to third parties where they do not have appropriate justification and evidence for doing so, in line with the current rules on fair value.