ELM Group responds to FCA consultation on multi-occupancy leasehold insurance reforms

22 June 2023

The consultation period for the FCA report which is looking to clampdown on high insurance costs for leaseholders is closing this month and we took this as an opportunity to reflect on how our ethical practices have enabled us to operate a healthy business model without taking excessive commissions or applying hidden costs which are detrimental to leaseholders.

In April 2023, the FCA set out a proposal for new rights and protections for leaseholders to improve the transparency of the multi-occupancy leasehold buildings insurance market. This was in response to an FCA review which found that the average per policy insurance broker commission over the review period increased by 46%, with firms in the sample paying over £80m of commission, usually to the freeholder or the property managing agent.

The FCA is urging brokers to immediately stop paying commissions to third parties (including property managing agents and freeholders) where they do not have appropriate justification and evidence for doing so in line with our rules on fair value.

As an ethical organisation, we are proud to state that we operate with complete transparency and without profiting from leaseholders. After examining our own ethical practices in this area, which has always seen us prioritise value for customers over making large profits, we have responded to the FCA consultation which closed on 9th June with hopes that we can set an example for others in the industry to find ways to operate more transparently and in the best interest of leaseholders.

The insurance of managed and owned property is one of the largest projects we undertake on behalf of leaseholders and owners each year, and we conduct all the work in-house within the cost of our management fee. There are never any hidden costs and we don’t ever apply commissions to cover the work entailed. This process takes several members of our team extensive time and is carried out by them behind the scenes prior to agreeing any policy renewal.

As a not-for-profit company, it is essential that we obtain a policy that provides peace of mind in terms of the actual cover provided. We also recognise that it is of great importance to our customers that we are obtaining good value and we focus on this during each renewal process as we set out identify the best, most cost-effective options for customers, keeping any increases to an absolute minimum.

Unfortunately, there’s a tendency in the industry for organisations to set low management fees with the aim of undercutting competitors and securing new business. Inevitably this approach places pressure on businesses to make profit elsewhere.

As a company with ethical values, we offer a very different approach. Rather than setting low fees to attract business, we look to charge landlords and freeholders fair management fees which reasonably reflect our extensive in-house processes which help ensure best possible value for leaseholders and a strong overall service to the landlord/freeholder. This enables us to maintain a healthy and transparent business model which does not rely on making huge commissions and charging extra costs to recover from the impact of lowering our fees to secure new business.

Our approach has all parties’ interests in mind by ensuring we’re able to deliver a quality service for landlords and freeholders whilst ensuring we have the right in-house processes to secure the best value for leaseholders and operate in their best interests at all times.

Our actions are all in line with our company values in which we strive to keep our promises and deliver on our commitments to our customers, take responsibility for solving issues and act with integrity, honest and transparency, always.

Please contact us at enquiries@elmgroup.org.uk if you would like to find out more about our estate management services.