Sir Peter Bottomley calls on insurers to help with disclosure to property leaseholders
A leading MP has hit out at the “bad practices” and “deceit” that enable property managing agents to take high commissions on buildings insurance paid for by leaseholders.
Sir Peter Bottomley spoke to Insurance Times ahead of a meeting in his offices between lobby groups the Leasehold Knowledge Partnership (LKP), the British Property Federation (BPF) and the ABI.
The meeting was prompted by the current investigation by the Competition and Markets Authority (CMA) into the residential property managing agent sector – which is looking at buildings insurance and commissions.
Sir Peter, who has been campaigning for transparency on commissions, called on the insurance industry to be part of the solution.
“Every act of finding insurance by the managing agent on behalf of the freeholder, which is paid for by the leaseholder, should be out in the open,” he told Insurance Times.
“There are too many examples of bad practices, deceit and withholding information and premiums being too high, or sometimes cover being too low.”
Co-director of the LKP, Martin Boyd, said along with Sir Peter, the groups told the ABI of fears that high commissions could be driving up buildings insurance premiums for leaseholders who have no say on the negotiations.
The share of commission is typically negotiated between the agent or freeholder and a broker, either with or without the insurer’s knowledge.
Boyd said: “It is fairly inevitable that if high commissions are being paid it is certainly not going to reduce the cost of the overall premium.”
He added that there were also concerns around the quality of cover and the inability of the leaseholder to get proper redress through the financial ombudsman if they did not arrange the original cover.
“There is obviously a disconnection between the person who pays for the policy, the leaseholder, and the one who takes out the contract,” Boyd told Insurance Times.
“The insurance companies are under some pressure too because some of the large landlords have the power in dictating what the commissions should be.”
The BPF has also long called on the FCA to intervene on the issue of high commissions.
Director of policy Ian Fletcher said: “I think the ABI and FCA now appreciate there is a large body of opinion that believes the only way to resolve this issue across this sector as a whole is for the FCA to intervene.
“There have been attempts by various groups in the past, such as lease codes and self regulatory schemes for managing agents, but you are only ever going to capture a part of the market in that regard.”
The ABI declined to comment.