Now angry leaseholders kick back at the brokers

Now angry leaseholders kick back at the brokers
This was a headline in The Observer on the 1st March 2009.
jml-Insurance.co.uk was told in advance that an article would be appearing as jml-insurance.co.uk acts as Introducer to Ember JD Insurance.Brokers. Ember's insurance broker, Neil Cook advised us that he had been contacted by Jamie Elliott of the Observer.

The article was reporting that Flat owners could be paying up to double the best rates for buildings cover, thanks to hidden commission being shared out between brokers and managing agents

It appears that owners of leasehold flats are paying up to double the market rate for buildings insurance because brokers are paying "kickbacks" to the block management property agents who manage their homes.

Some insurance brokers are choosing the insurer that pays the most commission, instead of the company that offers the best value - and then sharing this commission with the managing agent.

This has been a major concern for Neil Cook as jml-insurance.co reported in a press release in November 2007
The report goes on to say that Insurers who pay the most commission are often also those who charge the highest premiums. Although leaseholders bear the extra cost, they rarely find out about the inducements because there may not be an invoice and the inducements do not appear on their service charge statement or other documents.

This must be normal as a representative from jm-insurance.co.uk advised that with flats their company are involved with they have absolutely no idea who the insurance company used are as the block management companies involved just send out an annual request for ground rent service charges and insurance and the item insurance would just be mentioned in the annual accounts.

Neil Cook, of Ember JD Insurance Brokers, has been approached by an increasing numbers of leaseholders who are being charged significantly above the going rate. Neil said "I see a lot of inflated premiums for blocks of flats where it just doesn't add up, and there is no way the broker has sought the best deal," he says. "Sometimes it is as much as double but, typically, the premium is about 30% above what you would expect to pay."

The Observer’s report went onto say that one leaseholder, who does not want to be named, learned he was paying over the odds only after he and other residents took over the management of their south London flats in October last year. The leaseholder said "When we got hold of the paperwork we saw that the company that managed the block was paying £6,632 a year for buildings insurance, without too much difficulty, we managed to get the premium down to £3,731."

He claims that when he sought quotes from insurance brokers, two out of the eight he called asked if he wanted a payment for himself. "I was surprised they were suggesting I take a payment from them that would not appear on any of the paperwork," he says. "I wasn't doing this just for myself and, of course, I refused."

To see whether or not this experience was exceptional, The Observer’s reporter approached eight insurance brokers on the pretext of insuring a block of 20 flats.

There obviously is a problem here and Leaseholders should ask their block management agents for details of the insurance if they feel the amounts are excessive. Normally block management agents will provide copies of quotes for re-decoration, carpeting and other repairs for leaseholders says Philip Suter of jml-insurance.co.uk, so there shouldn’t be a reason why they can’t be provided with insurance information.

If you are not happy with the Block Management agent, get together with other leaseholders and the elected Directors of the block’s company and appoint new agents. Most blocks of flats have a residents company that the agents actually work for and the Directors are usually some of the leaseholders.

Philip Suter went on to say “Most block management agents in my experience do not necessarily charge very high management fees for the amount of work they carry out during the course of the year so this is why they are probably trying to gain additional revenue from the insurance policies they arrange for the various leaseholders”For more information about Insuring your Block via Ember JD Insurance Brokers click here