The British Insurance Brokers’ Association (BIBA) has commissioned work to help members demonstrate the “fair value” of services provided as multi-occupancy building insurance market reforms take effect. 

The Financial Conduct Authority (FCA) last week confirmed reforms will start from January following a review triggered by rising premiums in the multi-occupancy building sector in the wake of the 2017 Grenfell Tower fire. 

Insurance firms will have to act in leaseholders’ best interests, treat them as customers when designing products and will be banned from recommending a policy based on commission or remuneration levels.

Following a review into broker remuneration practices, the FCA expects brokers to stop paying commissions to third parties, including property managing agents and freeholders, where they do not have appropriate justification and evidence for doing so in line with rules on fair value. 

Most flats in Great Britain are purchased on a leasehold basis. Terms are usually long and often last 90 or 120 years.  

BIBA says it welcomes increased transparency, and a number of members have been pro-active on disclosures, and the FCA’s statement coincides with the group’s work on the issues. 

“This entails a new Fair Value Assessment Framework which members can adapt for their own business models to articulate, measure and evidence value for both the commission they retain and any commission they might share with freeholders and property managing agents for insurance related activities they undertake,” it says. 

Members are also being asked to sign a new pledge that makes commitments around remuneration practices for residential buildings over 11 metres in height that have fire safety issues. 

BIBA says work with the Association of British Insurances and McGill & Partners to launch a new Fire Safety Reinsurance Facility later this year is well advanced. 

The facility will allow a group of insurers to deploy more capacity for medium and high-rise residential buildings that have fire safety issues.  

The scheme aims to offer more affordable premiums, which will help lessen the financial burden for leaseholders caught up in the flammable cladding crisis.