Brokers choose costly cover to pay leaseholders kickbacks
Owners of leasehold flats are paying up to double the market rate for buildings insurance because brokers are paying "kickbacks" to the property agents who manage their homes, The Guardian claims
Insurance broker Neil Cook, of Ember JD Insurance, raised the alarm claiming he is being approached by increasing numbers of leaseholders who are being charged significantly above the going rate.
"I see a lot of inflated premiums for blocks of flats where it just doesn't add up, and there is no way the broker has sought the best deal," he told The Guardian. "Sometimes it is as much as double but, typically, the premium is about 30% above what you would expect to pay."
One leaseholder who took over managing his block of flats cut his premium from £6,632 a year to £3,731.
The Guardian approached eight insurance brokers on the pretext of insuring a block of 20 flats.
Two refused to make any payment to secure business, one claiming such an arrangement would "contravene the rules and be unfair to leaseholders". Another refused on the grounds that her firm earned too little commission to make the practice viable.
But six brokers did agree to share commission and said the payments to managing agents were common.
"We can sometimes pay you as much as 20%," said one broker at a large firm that specialises in property insurance. "You give us a cheque for the total cost on our invoice and we give you another cheque for however much we agree you're going to get. It's as simple as that."
"If you want to split the commission it can mean a higher premium," warned another north London broker. "It depends how much you want to charge your leaseholders."
A broker with a Kent-based firm explained: "We can earn commission of between 10% and 28%, but the higher commission comes with some hefty premiums. We can go for the higher premium and share the commission with you if you want."
