Source · Select Committees · Public Accounts Committee
Recommendation 4
4
Accepted
Undertake urgent review of building insurance premiums and propose actions to reduce costs for residents.
Conclusion
MHCLG is not doing enough to manage the risk that residents in affected buildings face exorbitant insurance premiums in the long term. The previous Committee raised concerns in 2020 about the spiralling insurance costs faced by residents awaiting remediation and MHCLG committed to working with insurers to address them. MHCLG asserts that it has taken steps to ban terrible practices around high fees and commissions for arranging insurance. However, industry research shows that premiums for high–rise buildings doubled between 2016 and 2021 and MHCLG admits that the risk pooling arrangements it has brokered with the insurance industry have yet to reduce the highest rates. Insurance costs for buildings remediated under MHCLG’s more proportionate approach to risk (using the PAS 9980 standard) may remain high even after works are completed. This new standard prioritises risk to life rather than risk to property and supports greater use of lower cost mitigations such as sprinklers. Where risk is deemed tolerable, this can mean some flammable cladding staying in place. The insurance industry is warning that, without a standard that prioritises risk to property and requires the removal of combustible cladding, it will be unable to reduce premiums significantly. recommendation MHCLG should urgently: a. undertake a review of insurance premiums so it understands how rates compare for those remediated under both the new and old standard; and b. consider what more it can do to: i) help bring down insurance premiums for residents awaiting remediation works; and ii) address the risk that insurance for buildings remediated in accordance with the newer PAS 9980 standard is unaffordable even after works are compete, and ask the insurance industry to provide information about the overall costs of insurance premiums in high rise buildings post Grenfell and the increased insurance company payouts to policy holders. 6
Government Response Summary
The government agrees and is continuing to work with industry to gather data on insurance costs before, during, and after remediation. This data will inform its consideration of supporting the industry to reduce fire-related liabilities and it has asked the insurance industry for claims performance evidence, with an update promised by end of 2025.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. cost of buildings insurance. MHCLG therefore continues to work with industry and other stakeholders to gather data on insurance costs including premiums for buildings before, during and after remediation. This data will inform MHCLG’s work with industry, announced in December 2024, the Remediation Acceleration Plan (RAP), to consider whether for the duration of remediation programmes, government might support industry to reduce fire related liabilities, in order to reduce the high insurance bills some leaseholders are facing. The evidence being collected will help to ensure any options for support are targeted and effective. The government’s view is that remediation reduces risk and that this should be reflected in pricing. PAS 9980 has been developed by the British Standards Institute who drew on expert advice from professionals across industry and public consultation. Recognising that insurers set prices based on risk and their obligation to provide products that are fair value, MHCLG has also asked the insurance industry to build the evidence on the claims performance of remediated buildings and to share that with the government. The government will share an update on progress by the end of 2025.