Broker’s commission: one less thing to argue about?

Over the weekend five major UK insurance brokers – Willis Towers Watson, Lockton, Brown & Brown, Bridge and PIB – announced they would cap their fees for arranging buildings insurance for landlords and end the practice of sharing commissions with third parties (aka landlords) instructing them on placing buildings insurance. Amidst the backdrop of another year of rising premiums this will no doubt be welcome news to leaseholders of all kinds, given these fees would invariably be recharged to tenants. 

The practice of sharing commissions with landlords, or at least the principle of it, has been around for many years. I first encountered it as a junior lawyer negotiating insurance provisions in leases, where the landlord invariably includes a statement that it is entitled to any commission paid in connection with placing its insurance. Like many in the comments on the article I initially found it surprising that the market had generally got comfortable (or at least tenants begrudgingly accepted) this arrangement. It would be interesting to know how widespread it was in practice, particularly among the big institutional landlords; I suspect less likely than some might think. 

In any event this news will hopefully make for one less point in lease negotiations – unless of course landlords seek to retain the clause “just in case”… 

Click here for the FT article (£).

Lee Rowley, minister for building safety, welcomed the decision of the brokers "to step up and demonstrate their willingness to do more on bringing premiums down".

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