FOI reveals scale of FCA investigation into leaseholder insurance

Michael Gove, the then Secretary of State for Levelling Up, Housing and Communities Minister, wrote to the watchdog in January demanding a market review saying he was “extremely concerned” about the pressure leaseholders face from rapidly escalating insurance premiums on blocks of flats following the Grenfell Tower Tragedy.

FCA CEO Nikhil Rathi responded the same day while executive director, consumers and competition, Sheldon Mills issued Dear CEO letters to brokers and insurers.

Mills warned that commission levels should not be hitting the fair value of products and committed to collecting information to examine firms’ approach to pricing for multi-occupancy buildings.

On 10 May Mills updated Gove on the watchdog’s progress.

He set out that since the exchange of letters it had collected high level data and held the series of meetings with insurers, brokers and through trade bodies.

The FOI detailed as part of the review the FCA met with 19 brokers over 10 meetings and met the British Insurance Brokers’ Association eight times.

Data requests

In the 10 May letter Mills also highlighted the FCA had sent data requests to 17 insurers in March and to 26 intermediaries, including brokers and MGAs, in April.

The information request to brokers included asking for details on commission, managing conflicts of interest and levels of complaints.

The May letter continued that the watchdog would be carrying out the analysis of pricing, fair value and looking for potentially unfair practices through both quantitative and qualitative analysis across the two data sets.

According to Mills, the FCA had “engaged an independent third-party consultancy to support delivering this work at pace”.

The FOI confirmed Deloitte as the partner, however the FCA declined to say how much the consultants were being paid. The authority noted that as of 1 July the “indicative range of spend” was £0-£75,000.

Workshops

In his most recent letter Mills set out the consultancy was also helping in the “design and facilitation of appropriate industry engagement”.

He listed that there would be two phases, in May and June, of workshops and focus groups to run in parallel with and complement the data analysis work.

The forecast was to involve insurers, intermediaries, trade bodies and other associated groups such as property managers and buyers.

The workshops and focus groups were designed to look at current challenges and the potential impact and appropriateness of any remedy or market change should this be necessary, Mills wrote. He added the second phase would consider potential interventions.

The FOI reported that six workshops were held in the first phase with 58 firm representatives and four in the second phase with 39 firm representatives.

Employees

In conclusion the FCA confirmed to Insurance Age that 15 members of staff had been involved with the data analysis project but made clear that not all staff were working full time on the project.

A total of 31 employees, as of 1 July, have worked on all the actions listed in Mills’ 10 May letter but again not all have done so full time.

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