The rules and principles which apply

The rules in ICOBS 6A.7 require firms to provide certain disclosures to leaseholders under a Multi-Occupancy Building (MOB) insurance policy.

In the FCA Handbook, the term leaseholders will include any natural persons who are policy stakeholders or policyholders, who are acting outside of their trade or profession and who are liable to pay service charges in relation to tenancies for dwellings (in line with the Landlord and Tenant Act 1985) and, where relevant, a recognised tenants’ association.

We have included an overview of the background to the introduction of these rules and of the various FCA definitions relating to MOB insurance disclosures in Bulletin 355 which is linked above.

The table in ICOBS 6A.7.21R sets out the responsibilities of insurers and insurance intermediaries in relation to which firm will be responsible for producing the information required by this section and which firm will be responsible for giving this information to the customer, or leaseholder.

How this may affect firms.

As soon as reasonably practicable after the conclusion of a MOB insurance contract, and upon any subsequent renewal, a firm must give the customer the below information (and tell the customer to pass a copy of this information on promptly and in full to any leaseholder of the building in relation to which the multi-occupancy building insurance contract provides cover):

• A summary of the cover
• Pricing information
• Remuneration information
• Placing and shopping around information
• Conflicts of interest information

If the firm is in contact with, or has contact details for, a leaseholder, it can instead provide the information directly to the leaseholder. If the firm has been made aware that the leaseholder has not received any information from the customer, it must provide the information direct to the leaseholder.

Summary of Cover

Production of the summary of cover is the responsibility of the insurer and should be provided to the customer by the intermediary who is in direct contact with them. This summary must include where applicable, the following information:

• Name of the insurance undertaking and its regulatory status.
• Type of insurance.
• Main risks insured.
• Summary of excluded risks.
• The insured sum, together with:
  • in the case of a flat, the amount for which the building containing it is insured under the policy and, if specified in the policy, the amount for which the flat is insured under it, and
  • in the case of a dwelling other than a flat, the amount for which the dwelling is insured under the policy.
• Term or duration of the policy including the start and end dates of the contract.
• Exclusions where claims cannot be made.
• Significant features and benefits.

Pricing information

Production of the pricing information is the responsibility of the insurer and should be provided to the customer by the intermediary who is in direct contact with them. The information must set out the total premium for the policy and include:

• The amount of insurance premium tax.
• The amount of value added tax.
• A breakdown of the premium at:
  • (in the case of a flat) building level and (if specified in the policy) the flat; and
  • (in the case of a dwelling that is not a flat) at dwelling level.

Where a firm is unable to identify the specific amount of premium at building or dwelling level, the firm may provide an estimate of the breakdown of the premium for that building or dwelling but must take reasonable care when producing the estimate to ensure that the leaseholder can rely upon the amount to understand the building or dwelling level premium.

Remuneration information

Remuneration information must be provided in relation to any insurance intermediary involved within the policy distribution chain and should be provided to the customer by the intermediary who is in direct contact with them.

Remuneration information must include the total commission that the firm and any associate receives in connection with the MOB insurance contract and this also includes any remuneration or other financial incentive offered or given by the firm to any third party, including the freeholder or anyone acting on their behalf, in particular where the firm knows, or should be reasonably aware, that the sum will be included in the amount a leaseholder would be liable to pay,

The remuneration disclosure must be provided in cash terms (estimated, if necessary).

Placement and shopping around information

This information should be provided by the intermediary in direct contact with the customer and should include the number of alternative insurance quotes the firm obtained from:

• the insurance undertaking with which the multi-occupancy building insurance contract was taken out; and
• any other insurance undertaking(s)

Firms must also include an explanation of why the particular multi-occupancy building insurance contract taken out was consistent with the interests of both the customer and the leaseholder.

The explanation may be adapted according to whether the firm provided a personal recommendation in relation to the policy or not. It would be expected that where a personal recommendation has been provided, the explanation will set out why the particular policy was presented as suitable for the customer, taking into account its level of cover and cost, and relevant exclusions, excesses, limitations and conditions. Whether or not the policy was taken out following the provision of advice to the customer, the explanation should provide sufficient detail to enable the customer and leaseholder to understand why the particular policy was proposed.

A firm need only provide further details about the quotes it obtained if this is requested by the customer or leaseholder.

Conflicts of interest information

Conflicts of Interest information must be provided to the customer by the intermediary in direct contact with them and this information must include:

• whether the firm has a direct or indirect holding representing 10% or more of the voting rights or capital in a given insurance undertaking,
• whether a given insurance undertaking or its parent undertaking has a direct or indirect holding representing 10% or more of the voting rights or capital in the firm; and
• whether the firm is representing the customer or is acting for and on behalf of the insurer.

Method of Disclosure

The required disclosure information must be provided to the customer in writing (in a durable medium),  either in a standalone document or a combination of documents.

Firms must ensure as with all customer communications that these disclosures are clear, fair and not misleading, however care should be taken to ensure that they are accessible and easy to understand not just for the customer, but also the leaseholder who may not have the same level of understanding as the customer in relation to property insurance matters. This should include providing important information in a sufficiently prominent way which is clearly identifiable as containing key information that the leaseholder should read.

The FCA also reminds firms that they should respond to queries received from customers and leaseholders relating to these disclosures promptly, providing good outcomes-focused support that is appropriate given the nature of the query, including an appropriate level of information to meet their needs

A firm is not expected to duplicate the provision of information which is already included within existing documents to the customer and so may rely (at least in part) on documents such as the IPID or policy summary where these include the relevant disclosures, however when determining the format in which the firm will provide the information a firm should consider what a leaseholder needs in order to understand the relevance of any information provided and the prominence of that information for the leaseholders purposes.

To assist firms with making these disclosures we have provided MOB Insurance disclosure templates (see Document CBC18 and CBC19) which firms can tailor to their own requirements.