Building Insurance - tax scam?

hambone wrote: »

Thanks for your replies.

The property is not listed or in a flood/subsidence vulnerable area but it could be seen as 'non standard' as the ground floor is a vacant office.

So I can understand that the risk is deemed as higher but surely the 'rebuild' value should remain the same . Under a previous freeholder in 1999 the rebuild value was £180,000 and I have been told by a broker that by today's valuation it should be no more than £300,000 ?
But this present freeholder has increased the rebuild now to over £1m. He is a property developer with many properties and has owned the freehold for 8 years. However only my address is on the schedule (he sends me a copy) so I dont think its a block policy but every year the rebuild value and the premium goes up.

I asked to be put on the policy as an interested party years ago but he did it.

I just dont get it and feel totally powerless to do anything!

If the property is standard and not loaded for flod/subsidence risk then a lot of insurance companies don't actually need a sum insured for buildings, and list it as 'unlimited'. Usually a premium on a standard property is calculated in things like postcode, no of stories, no of bedrooms, what the building is used for etc.

I would insist on being named as an interested party. If you have a liability to the property and are paying towards its insurance, then you have a right to your name on the policy.

I don't have a lot of in depth knowledge of block policies, so sorry I don't think I can help any further.

Jen

N79 wrote: »

Basically, your freeholder is taking out an insurance policy as a broker (or is in cahoots with a broker) which pays a commission. Since the commission is related to the value of the policy they purchase a super expensive, over the top policy which you then have to pay for.

The above is not exactly illegal but the broker is breaking FSA regulations. The problem will be proving it.

Edit: I did not notice that Beaujolais-nouveau gave a much better summary above, with some good pointers on action.

But what you say is interesting. Acting for himself as his own client, my freeholder moves the buildings insurance to a different insurer every two years or so, which I assume he does in order to gain not only commission but new business commission (as a broker).

Some brave and well-off person will one day go to the LVT and break the dead-hand hold of the SGIK v Berrycroft precedent. Perhaps by getting expert reports about how insurance cover taken out by brokers for themselves as their own clients always resulted in unnecessarily high premiums and poor value for money.

In the meantime, under the Commonhold Reform Act 2002 the lessees can insure the building themselves, I think. However, the first time my neighbour and I tried to set this in motion the broker who agreed to process our application lost all the papers; to this day, I cannot shake off the feeling that he did it on purpose - he put the wrong postcode (for Maidstone instead of for Manchester) on the envelope - because of something he said to me about his main income being from arranging buildings insurance for corporate/big landowners.

hambone wrote: »

So is this 'new business commission' common between brokers and clients? Is it in the form of a hefty discount or an actual bung of cash? Any ideas how much it could amount to?

Not being in the insurance business, I don't know much more about this - I would look on the web to find out more. I am fairly sure, though, that it would be a bung because it would have to go through the accounts under a separate account heading of income (commission).

hambone wrote: »

It seems clear now that my freeholder is using his brother in law who is an insurance broker to get these deals on a block policy and earn himself a nice commission.

If this is a legal and accepted practise....and at least I know my house is insured......it seems I can either just accept having to pay over £1000 a year as a sort of annual 'tax' or spend months and wads in disputing it, hiring solicitors, getting stressed and incurring the wrath of the freeholder.....

I gather that it is legal. In your place, I would avail myself of the Commonhold Reform Act 2002 provision that allows leaseholders (acting together, obviously, as one cannot insure part of a building) to insure the building themselves.