‘Failing consumers’ – Gove gives Biba one month for commissions action plan
Government minister Michael Gove has given the British Insurance Brokers’ Association one month to drum up an action plan to address ‘completely unacceptable’ practices in the buildings’ insurance market.
In a letter sent last week to Biba CEO Steve White, Gove blasted Biba members for failing to change their behaviours on property commissions – despite previous warnings.
The Secretary of State for Levelling Up now wants detailed proposals from Biba within a month, drawing on consultation with its members, to ensure customers get fair value.
The letter comes at a time when the Financial Conduct Authority has published its report into the buildings insurance market, which found widespread failures.
Gove has told FCA chief Nikhil Rathi he is “outraged” at the behaviour of brokers making large and growing commissions in “opaque” ways at the expense of leaseholders with few rights.
Practices ‘completely unacceptable’
Gove wrote to Biba boss White: “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%.
“There is no suggestion that they have done sufficient additional work to justify this. In the same period, your members also paid over £80m to third parties, frequently without any explanation of who benefits, or how.
“These practices, clearly exposed, must necessarily attract forensic scrutiny from the government and regulators.
“At a time where a cost-of-living crisis already stretches leaseholders, and where they have too often faced other higher costs relating to building safety, I find these practices completely unacceptable.”
Gove warning
Gove went on to write that brokers have been given ‘sufficient warning’ about the ‘unacceptable practices’, adding ‘inflated’ commissions shared between property intermediaries must stop.
Gove now wants Biba members to put forward proposals on how they will ‘change their behaviour’.
Gove concluded: “If satisfactory proposals from the sector are not forthcoming, I will have to consider what other measures may be appropriate to ensure consumers are protected. I would like to see your detailed proposals within one month.”
Gove’s letter to White is the second time a minister has written to White about the subject.
The then Secretary of State at DLUHC, Simon Clarke, wrote to White in September last year concerning inflated commissions.
Biba response to crackdown
In November last year, following the original proposed remedies by the FCA to help leaseholders, Biba came out with a series of commitments.
It said it was aiming to draw up guidance with its specialist real estate members to promote greater transparency for leaseholders over the insurance purchase.
The trade body had confirmed it would consider whether it was possible to develop a product information template. This, Biba said, could be used by members with freeholders and property managing agents to summarise the key aspects of the insurance arrangements for the benefit of leaseholders.
Insurance Age has approached Biba for comment on the latest later.
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