Regulation of Building Insurance Commission: The New Insurance Broker Pledge

By Victoria Tchen

Trainee Solicitor

In response to growing concerns surrounding the transparency and value of commissions on building insurance for multioccupancy buildings, 12 insurance brokers have signed a government pledge to stop sharing commissions with parties who place or arrange insurance for residential buildings facing fire safety issues. These parties include property managing agents, landlords and freeholders.

Participating insurance brokers also made two additional commitments:  

  • To cap commission for their work in arranging insurance at 15% of the premium, whether the building has undergone remediation works or not
  • To disclose commissions to leaseholders per Financial Conducting Authority (FCA) regulations, if requested, and to collaborate with third parties to ensure transparency of fees to leaseholders.

The pledge targets residential buildings which have:

  • At least four storeys or
  • Are over 11 meters in height and where fire safety issues have been identified, such as those affected by combustible cladding, and where these have been made known to the broker.

Moving forward

The government intends that leaseholders can expect lower buildings insurance premiums from participating brokers due to the reduced commission charges payable by the participating brokers.

Since 31st December 2023, leaseholders have the right to request information about their policy from their broker, per updated FCA regulations.

The government has also recommended that property management agents, landlords and freeholders adhere to the RICS service charge code.

For more information, please contact Lucy Riley in our Commercial Property Team on 0345 646 0406 or fill in our online enquiry form for more information.