(Reuters) — Britain’s financial watchdog has proposed reforming how apartment blocks are insured after the deaths of 72 people in the Grenfell Tower fire in London led to huge insurance premiums.
The Financial Conduct Authority said on Wednesday that since the Grenfell fire in 2017, residential tenants have faced large increases in building insurance as some insurers pull out, making competition “not effective.”
Remaining insurers have limited commercial incentives to provide insurance or lower prices, the FCA said.
Average premiums doubled to £15,300 ($17,347) between 2016 and 2021, with larger increases for buildings with flammable cladding and high broker commissions.
“Brokers, freeholders and property managers were unable to demonstrate quantitatively how the increased cost of their commission provided additional value to their clients,”; the FCA said.
The watchdog’s proposed measures include creating an industry-wide insurance pool to limit the risk to individual insurers from buildings that still have flammable cladding or other material fire safety risks.
The FCA proposed that tenants would become “customers” of building insurers, a move that would bring policies under tough new consumer protection rules being rolled out to end rip-offs in personal financial products.
The Association of British Insurers said it was keenly aware of challenges for tenants affected by the building’s cladding and fire safety crisis.
“We support the FCA’s recommendations for a risk-sharing scheme and have been actively discussing options with industry and government,” said James Dalton, ABI’s head of general insurance.