The Financial Conduct Authority (FCA) has published a web page setting out its expectations for buildings insurance providers in terms of offering fair value insurance for leasehold properties. Recently, leaseholders of apartments have been paying more for buildings insurance, especially where the exterior has been covered with cladding.
The FCA says that insurers and intermediaries should consider the value of their products for customers. This consideration of value should take into account the total price, coverage and the effects of distribution agreements.
Where firms owe obligations directly to leaseholders they must consider whether they are arranging insurance that is consistent with the best interests of the property owner and the leaseholders.
Regulated firms must ensure that they are meeting all applicable FCA rules in addition to other legal obligations (for example, under landlord and tenant legislation) relevant to the insurance cover.
Firms should review their product governance arrangements for buildings insurance covering leasehold properties and should review whether the policies are being sold and distributed with the customer’s best interests in mind. This will require a review of whether the price is consistent with value and remuneration payments in the distribution chain.