FCA Block Insurance Rules for Leaseholders: What to Expect
Since 31 December 2023, FCA rules have treated residential leaseholders as customers when a block of flats is insured, even though the freeholder or management company is the policyholder. Insurers and brokers must design and distribute block policies so they give fair value to leaseholders, act in leaseholders' interests alongside the freeholder's, and give the policyholder information to pass to every leaseholder after the policy is placed and at renewal. That information includes a summary of cover, the premium with tax and a breakdown by building or flat, the commission earned by the broker and any payments to the freeholder or managing agent in cash terms, and, for brokers, how many quotes were obtained and why the chosen policy was consistent with the interests of leaseholders. The FCA did not cap commission, but payments that don't give leaseholders fair value must be reduced or stopped. Miller & Partner places block insurance with these rules built in.
Key facts at a glance
- In force since 31 December 2023 for block policies placed or renewed from that date.
- Residential leaseholders count as customers for fair value and best-interests rules. Commercial leaseholders don't.
- Commission must be disclosed in cash terms, including payments to freeholders and managing agents.
- Brokers must say how many quotes they obtained and why the chosen policy suited leaseholders.
- There is no commission cap, but pay that doesn't give leaseholders fair value must go.
- The policyholder must pass the information on to every leaseholder, promptly and in full.
Why did the FCA change the rules on block insurance?
The changes came after the Grenfell Tower fire, when building insurance costs for many blocks rose steeply. The FCA's review of the multi-occupancy market led to its final rules in policy statement PS23/14, published in late 2023.
What information can leaseholders get about their block insurance?
| Information | What it includes |
|---|---|
| Summary of cover | The insurer, what is insured and excluded, sums insured, excesses, policy dates and key features |
| Price | Total premium, insurance premium tax and any VAT, with a breakdown by building or flat (which can be a reasonable estimate) |
| Remuneration | Commission received by the firm and its associates, and any payment to the freeholder, managing agent or others, in cash terms |
| Shopping around (brokers) | How many alternative quotes were obtained, and why the policy chosen was consistent with the interests of the customer and leaseholders |
| Conflicts of interest (brokers) | Significant shareholdings between the broker and the insurer, and whether the broker acts for the client or the insurer |
The information has to be clear, fair and not misleading, and given on paper or another durable medium. Leaseholders can ask for further detail about the quotes obtained, and firms must answer their questions promptly.
Who has to pass the information to leaseholders?
Many freeholders and managing agents are not FCA-regulated, so the FCA can't require them to pass the information on. Instead, the rules put the duty on the insurer or broker to follow up where leaseholders haven't been given it.
Is commission on block insurance banned?
The Leasehold and Freehold Reform Act 2024 also gives the government powers to restrict what landlords and managing agents earn from block insurance. Those provisions depend on further regulations, so check the current position before relying on them.
What should freeholders and managing agents do?
- Ask your broker for the leaseholder information pack at renewal, and distribute it to every leaseholder.
- Review any commission or fee you receive, and be able to show the work it pays for.
- Keep the rebuild valuation current. Over- and underinsurance both cost leaseholders. See the condition of average explained.
- Tackle the causes of claims, which drive the premium leaseholders pay. See block insurance after a claim.
- For RMC and RTM companies, check the directors are protected. See RMC and RTM company insurance.
Our approach, through the Insurability Framework™, is to present the block properly to the markets that suit it and give the freeholder and leaseholders a clear account of what was obtained and why.
Frequently asked questions
Yes. Since 31 December 2023, firms placing block insurance must provide information for leaseholders that includes the commission received and any payments to the freeholder or managing agent, stated in cash terms.
They came into force on 31 December 2023 and apply to block insurance contracts placed or renewed from that date.
No. The rules protect residential leaseholders who pay a service charge. Commercial tenants, such as shops in a mixed-use block, are not covered by these specific protections.
No. There is no cap or ban, but remuneration must give leaseholders fair value and be consistent with their interests. Payments that don't meet that standard must be reduced or stopped.
Ask your freeholder or managing agent first. If you still don't receive it, contact the broker or insurer. If they are told a leaseholder hasn't received the information, they must provide it directly.
The rules require brokers to disclose how many alternative quotes they obtained and explain why the policy chosen was consistent with the interests of the customer and leaseholders. Leaseholders can ask for more detail about those quotes.
Only where it gives leaseholders fair value, such as payment for genuine work on the insurance, and it must be disclosed. The Leasehold and Freehold Reform Act 2024 also gives the government powers to restrict these payments further.
Yes. The rules govern how the policy is placed and explained, not which buildings can be insured. We place blocks with claims, cladding issues and mixed-use occupancies and provide the leaseholder information as required.
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