EOCS Engagement with the Competition and Markets Authority

For some years we
have been aware of, and faced directly, issues in the opaque residential
building insurance regime. There has long appeared to be evidence of
cartel-like behaviour by the Insurers, with apparent conflicts of interest
between Freeholders, Brokers, and Insurers, meaning the building insurance,
that leaseholders are forced to pay for, is not and has never been fair or fit
for purpose.

We are the ones
who have to suffer insurance costs but we are usually unable to influence the
selection of the Broker and / or Insurer, and avenues of seeking redress are
inherently onerous, if not impossible. Despite roundtable meetings with the
Government and industry (see the notes from the March 11th meeting
here), and our providing over a hundred examples of exorbitant
building insurance cases, we are concerned that there is no onus on the
Government to intervene to help leaseholders or expedite a resolution. We
believe that this may, in part, be due to the taxation income on insurance
as implicitly noted by John Glen MP,
Economic Secretary to the Treasury on 11th January 2021
response to a question on waiving Insurance Premium Tax on sky-high
leaseholders’ premiums as a result of the building safety crisis.


The lack of any
action by the Government to help innocent leaseholders led us to report
building insurance issues to both the Competition and Markets Authority (CMA)
and the Financial Conduct Authority (FCA) in May 2021 –
you can read the report we submitted here.


The CMA responded
that they had considered this specific issue in relation to their different
tools (specifically market and consumer law) but the conclusion was that they
do not believe they are suited to tackle these pressing issues, and have
referred us to pursue this issue with the FCA, as this is the body that
regulates how insurance firms behave, as well as more broadly the integrity of
the UK’s financial markets.


The FCA has
responded to advise that it expects firms to:

1.    Consider whether the products they offer
represent fair value for money

2.    Consider whether they are arranging
insurance that is consistent with their obligation to act fairly and
professionally, in the best interests of the leaseholders as well as the
property owner

3.    Meet all applicable rules and take account
of any wider legal obligations, e.g. under landlord and tenant legislation

4.    For regulated insurance intermediaries who
receive remuneration for their work distributing buildings policies, to make
sure the remuneration is consistent with the customer’s best interests rule


The FCA has
further advised that it would encourage people affected by insurance premiums
to ask their Managing Agent for "an explanation of the additional cost”.
If the agent is regulated by the FCA, they would expect them to deal with any
requests for information reasonably and to provide adequate information –
should the responses be unsatisfactory then people may be eligible to complain
to the Financial Ombudsman Service.

The FCA has also
asked for any “intelligence about regulated firms” that we believe are acting
unfairly and told us this would be shared “with the relevant supervisory teams
to inform their oversight of these firms”.

Take action: if you have relevant information, please email it to
[email protected] so we can collate specific examples to
share with the FCA.

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