New Clause 12 - Assessment of the impact of building safety issues on access to insurance

Building Safety Bill – in a Public Bill Committee at 11:00 am on 26th October 2021.

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“(1) Within one year of the day on which this Act is passed the Secretary of State must carry out a review of the impact of building safety issues, including the provisions of this Act, on access to insurance.

(2) The review as set out in subsection (1) shall include assessment of the United Kingdom insurance market.

(3) The review must consider the impact of building safety issues, confidence in the building safety industry and the impact of advice given by his Department on building safety given since 14 July 2017 on—

(a) the availability and cost of insurance for residential blocks;

(b) the availability and cost of professional indemnity insurance for workers in the building safety industry;

(c) requirements placed on buildings in order to access building insurance; and

(d) the wider insurance market.

(4) The review must make recommendation as to any further action needed by Government or the industry to improve access to affordable residential and professional insurance across the United Kingdom.”—

This new clause would ensure the Government publish an assessment of the impact of the building safety risks on the UK insurance market for residential buildings and professional indemnity insurance for those working in building safety.

Brought up, and read the First time.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

I beg to move, That the clause be read a Second time.

Insurance costs are suffocating leaseholders up and down the country. I know that the Minister is keen for me to bring up casework during these sittings—indeed, the hon. Member for Bolton North East did so just last week—and it is a very relevant and appropriate piece of casework, so I make no apology for bringing it up. There is a development that is just outside my constituency, called The Decks. One part of the development is above 18 metres; the other part is below 18 metres, so one part is within the scope of the Building Safety Bill as it stands, and one is not.

The resident leaseholders in that development, regardless of whether they are in scope or out of scope, have faced a shocking rise in insurance premiums of 1,400% over the past two years. Their insurance rose from £34,000 in 2019, before the current problems with building safety were identified, to £254,000 in 2020. Despite the problems having been identified and work done with the local fire authority to put alarms in place to mitigate and reduce risk, the insurance then more than doubled yet again to £522,000 at the start of this year. Risk reduced, but premiums yet again going up—a situation mirrored the length and breadth of this country. That is just one case out of nine that I looked at in research published in The Sunday Telegraph this week, which provides a rough snapshot of the costs involved when leaseholders are hit by rocketing, sky-high, scandalous insurance premiums.

For the nine buildings we in the Labour party looked at, premiums have risen by 600% to £1,734 a year. Moreover, despite the inflated cost, the new coverage often covers only part of the value of the building—in some cases, as little as 40%. Premiums are more than doubling across the length and breadth of the country, yet the new premiums cover only a fraction of the potential liability.

That cost comes alongside the remediation bills, which we have all shown evidence for throughout this Committee stage and throughout the journey relating to this horrendous building safety scandal. Just before the article went to print, I was updated by someone who contributed to that research, who said that, in part because of the uncertainty surrounding the insurance costs of the building, an offer on her flat had fallen through. That is another addition to the complexity of the building safety scandal, and comes just a few weeks after a management agency had chased her for £2,885 for service charges.

The analysis in The Sunday Telegraph that I mentioned was commented on by the Department. A source said that the Secretary of State

“will not hesitate to take further action if required.”

Lord Greenhalgh in the other place did a series of, I think, Zoom roundtables with the Association of British Insurers and other stakeholders in the insurance industry. This problem is not only still a live issue, but getting significantly worse.

In presenting this new clause, I know hon. Members—hopefully those on both sides of the Chamber—will have evidence of examples in their constituencies. I urge the Minister and the Department to accept this quite simple new clause, which would ensure that within a year, a review is done of this toxic situation with the insurance industry. Is it profiteering? I do not know; that is why we need the review. The review will also look at the problem of professional indemnity insurance, which I suggest is more important than ever if we look at the plethora of new professionals that we will create in this landscape.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

I am grateful to the hon. Gentleman for again raising this important matter. I appreciate the issue that the new clause seeks to tackle: the challenge of freeholders and leaseholders of some residential buildings, in particular those that need remediation, who are struggling to obtain affordable buildings insurance; and the challenge faced by some construction professionals —the fire-safety professionals in particular—in obtaining affordable professional indemnity insurance.

As the hon. Gentleman said, engaging with the insurance sector and other relevant stakeholders—which the Government are doing on an ongoing basis—is vital to understanding the effects of building safety issues on insurance provision. We want—he has heard me say it before, and in no way do I apologise for saying it again— insurers to take a more proportionate approach in terms of the availability and cost of insurance, just as much as we want lenders to take a more proportionate approach with respect to mortgage lending.

The intention of the hon. Gentleman’s new clause—to improve access to affordable residential professional indemnity insurance—we believe should be met by other provisions in the Bill. Efforts to remediate existing buildings, as he knows, are supported by the building safety fund and other measures that we will bring forward shortly. A combination of those measures and this Bill ought to ensure that buildings are safer. Therefore, both professionals and residents should be able to access more affordable insurance. He will also know that Lord Greenhalgh and others have worked closely with the insurance sector to ensure that appropriate professional indemnity insurance in extremis is available to professionals so that they may carry out their duties.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

The evidence is crystal clear. Despite interventions by Lord Greenhalgh—just mentioned—premiums are still going up, regardless of whether a building is 11 to 18 metres or 18 metres-plus, which is in scope. Again, I urge the Government to accept the new clause and to add the amendment to the Bill.

Photo of Christopher Pincher Christopher Pincher Minister of State (Department for Levelling Up, Housing and Communities)

I understand where the hon. Gentleman is coming from, but I was going to say that the Government have of course spent £700,000 to ensure that more fire risk assessors are available to undertake risk assessments to evaluate the challenges to building safety, thereby also contributing to a more proportionate risk and lending regime.

The hon. Gentleman said that this was straightforward. On one level it is, but on another it is not, by which I mean that is hard to disentangle the effect of building safety issues on the availability and cost of insurance from other issues and where other market trends apply. For example, heavy rains or flooding can also have an effect on market trends, lending, and risk assurance availability and its price.

In conclusion—this is important—following Royal Assent to the Bill, and indeed before it, we will continue to monitor closely the provision of insurance and we will work with stakeholders, including freeholders and leaseholders, to encourage a much more proportionate approach for insuring, for pricing insurance, and for ensuring and delivering its availability.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

I thank the Minister for giving way again. He is generous with his time. To help focus minds in the insurance sector, will the Government consider a referral to the Competition and Markets Authority? For the life of me, I cannot understand how, when risks are reduced in some buildings up and down the country, we are seeing this pattern emerge of increases of 1,000%—

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.