Inside Out: I am a broker and a leaseholder – insurers and FCA must push for cladding crisis solution

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Post invites industry insiders affected by key issues they believe insurance is getting ‘inside out’ to share their perspective and state their case for change. Here a broker talks about how leaseholders are getting a rough deal.

I am an insurance broker, a practitioner in our industry for more than 30 years. I understand the mechanics.

As the owner of an apartment, I am also a leaseholder and one of the millions caught up in the fallout of the Grenfell disaster and the resulting cladding remediation programme required by the government to make our homes safe.

It’s hard to miss the media’s coverage of the issue. Stories of trapped families facing bankruptcy in worthless flats and ensuing depression in light of repair bills estimated at an average of £60,000 per home. You may have read too about the 24-hour fire warden patrols.

In my development in Birmingham, we have spent more than £200,000 so far. That’s before the cost of replacing unsafe cladding – our current estimate runs to an eye-watering £13.5m. Then there’s the £200,000 plus consultancy fees (still counting) to identify required works and costings.

There is currently no viable funding support from the government, leaving leaseholders – some already facing hardship due to the pandemic – to pick up the bulk of the costs.

On top of all this, until remediation works are complete and certified safe, we face monumental buildings insurance premium increases. An estimated 66% of UK leasehold owned flats in excess of 11m in height will require a new EWS1 fire certificate, equating to 700,000 homes in 44,000 buildings.

Rises at renewal

In Peckham, London, the premium on one block of flats increased at renewal from £34,000 to £300,000. A development in Manchester rose from £15,000 to £103,000. In my own development, we saw an overnight increase from £70,000 to £470,000.

I hear fellow leaseholders lambasting insurers for – in their view – “profiteering” from their misery.

‘The buildings are the same ones standing all these years, with no fires, so why hike premiums now?’ is their rationale. They demand the government issues an instruction to insurers to reduce these costs. To say this is presenting a public relations challenge for our industry is an understatement. Remember perception is reality, and our industry is seen as part of the problem.

I too am a desperate leaseholder who can ill afford these hikes but at the same time, I know it is unrealistic to expect insurers to ignore the risk assessment practices that underpin their rating and underwriting strategy. I know that insurers will take account of the updated material facts and underwrite the risk presented. The industry is independent, operating in a free market. Logic follows that the government cannot, therefore, mandate how an insurer will assess and rate a risk.

This may be true but it does not solve my problem. So where do I turn? I now look to the Association of British Insurers, the Financial Conduct Authority and the government.

I believe the ABI has already suggested it is not in favour of a Pool Re-type arrangement. However, we have precedents where the ABI and government have worked successfully together to deliver alternative solutions in the case of terrorism and flood zone insurance. Why can they not now look for a solution in these special circumstances? If not a pooling arrangement, then something else.

The FCA has played its part in intervening for better customer outcomes, very recently in the Covid-19 business interruption hearing. The FCA sets the bar higher for the protection of consumers. I call on the FCA to get involved and help secure a better outcome for personal lines policyholders.

Whatever the solution, we need it now. The problem will go away, hopefully within the next three to four years, as the repairs are completed. But in the meantime, I and my fellow leaseholders cannot contemplate ongoing levels of premium such as we are seeing today. All things being equal, the insurance bill on my block could be £1.5m over three years, when previously it would have been £200,000. It is not realistic to believe that policyholders can carry 750% premium increases.

We have the most sophisticated and creative insurance industry in the world, something to be proud of. I ask now that we demonstrate our mettle, join forces with the government and play our part to help our policyholders.

Post’s Inside Out column invites industry insiders affected by key issues they believe insurance is getting ‘inside out’ to share their perspective and state their case for change. If you work in insurance or have worked in insurance and would like to take part, please get in touch with us at

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