Chief executive says move will create a ’level playing field and avoid an early movers penalty’

Biba chief executive Steve White has urged the government to bring forward legislation to ban the sharing of commission with property managing agents, freeholders and landlords.

In a letter sent to Michael Gove earlier this week (27 April 2023), White also said the “remedy lies in our members evidencing fair value in a more robust and consistent way”.

It came after the FCA revealed that broker remuneration for insurance of multiple-occupancy residential buildings rose over a three year period.

Its report, published in April 2023, said: “Absolute levels of remuneration, including commissions, have risen by nearly 40% across the period under review, despite reductions in commission percentages.”

At the beginning of the year, Insurance Times reported that Gove had indicated that he would move to ban the practice of commissions paid to property managing agents and freeholders by insurance brokers.

He said the FCA report ”strengthens my resolve to ban property managing agents, landlords and freeholders taking commissions on buildings insurance and replace with transparent fees”.

In a letter to Biba on 17 April 2023, Gove said the findings of the FCA about broker commissions for buildings insurance “are stark”.

“Between 2019 and 2021, brokers have taken real-world retained commissions of £159m, an increase of 64%,” he added.

“There is no suggestion that they have done sufficient additional work to justify this.”

In response, White said Biba “will work with our members to improve the quality and accuracy of the fair value assessments that they produce and invite the FCA to work collaboratively with us to this end”.

”It is important to acknowledge that our members have deliberately calibrated down their earnings, often moving to a fee, to lessen the impact of the overall price increase on leaseholders,” he added.

He continued: “Our members are aware that the practice of sharing commission with property managing agents, freeholders and landlords for the work they do in administering insurance arrangements is due to come to an end following your announcement in January 2023.

“We would encourage you to bring forward the legislation to enact this as soon as possible to create a level playing field and avoid an early movers penalty.”


In his letter to Biba, Gove also requested proposals from its members outlining how they will “change their behaviour, individually and as a sector, to be more transparent and more competitive”.

“These practices, clearly exposed, must necessarily attract forensic scrutiny from the government and regulators,” the levelling up, housing and communities secretary added.

White said in response that Biba’s primary focus “has been to solve the cost of insurance for buildings that have significant fire safety defects and have suffered the most in terms of insurance premium increases”.

White also drew attention to “the linked issue” of affordable and adequate professional indemnity insurance (PII) for those professionals looking to help with remediation of tall buildings that have fire safety defects.

“We have flagged with DLUHC on multiple occasions that lack of PII is acting as a serious brake on the pace of remediation and excludes many smaller firms from considering tendering for work that is funded by the BSF and mid-rise schemes,” he said.

“We have offered our thoughts on a range of solutions to solve the problem and would ask for your support here.

“This matters not simply because it is intolerable that many leaseholders are still living in unsafe buildings, but also we know that once a building is remediated our members can negotiate the buildings premiums down to a significantly lower level.”

White also outlined six proposals that Biba was working on.

This incudes:

1. Implementing the reinsurance pooling arrangement with the ABI that aims to provide an answer to affordability and risk capacity for impaired multi-occupancy residential buildings.

2. Working with members to implement the pledge in its manifesto around fair value.

3. Issuing guidance to BIBA members on good practice in the construction of fair value assessments.

4. Ensuring members follow the new common code for the collection of data relative to multi occupancy buildings.

5. Working constructively with the FCA on its new consultation to improve transparency and disclosure to leaseholders on their insurance arrangements, so that they are in a more informed position to challenge the cost and scope of cover including remuneration arrangements.

6. Continuing discussions with government on how to solve the issue of the lack of affordable professional indemnity insurance to accelerate the remediation effort.