Canary Riverside helps pave the way for transparency in insurance commissions

The FCA has today announced proposals to give new rights and protections to leaseholders and improve transparency in the hitherto murky market of hidden commissions included within the buildings insurance premiums paid by leaseholders. As the Insurance Post notes, “[Canary Riverside] was the case that alerted the FCA to these poor remuneration practices and urged it to investigate further.”.

We were aware the FCA had been closely following our case, which was generating comment in the insurance press, and in March this year we wrote to the FCA (copied to Michael Gove’s department) setting out our story and calling for the FCA to change the rules.

Under the FCA’s proposals leaseholders would be defined as customers of buildings insurance - entitling them to the same information as the Landlord when it comes to information regarding commissions and other remuneration contained in the insurance premiums - and brokers would be required to justify to leaseholders the insurance policy premium provided ‘fair value’.

Our well-publicised FTT victory had necessitated a court order to be issued against the Landlord’s broker in order to compel them to disclose the commissions being paid to our Landlord (via WMS, a connected company) - because the Landlord had refused to provide this information and would not permit Reich to provide it either. More details of our FTT victory - whereby the FTT determined that the £1.5M of commissions (£1.6M incl IPT) paid to WMS, a company owned by our Landlord, were not payable - can be found on the Insurance S.27A page.

The Canary Riverside case first caught the insurance sector’s attention when the FTT ordered Reich (the Landlord’s broker) to disclose the commissions - eg, the Insurance Post and the Insurance Times. The disclosure confirmed what lessees had always believed: that the Landlord was earning substantial commissions through placing the buildings insurance. In ten years they had been paid >£1.5M, ie, £150k p.a, equating to £350 per flat p.a.

The FTT’s decision in December 2022 that none of the £1.5M commission paid to the Landlord via WMS was payable by leaseholders was also widely reported, including in the Financial Times and Insurance Post - scroll here to the Media heading to find more articles.

The FCA’s proposals, if implemented, would spare leaseholders from having to endure the two year battle we went through to obtain the scrappy piece of paper that Reich finally disclosed - which was enough for us to calculate the commissions and for the FTT to rule that the £1.5M paid to the Landlord between 2010 - 2019 was not payable by leaseholders*. However, the proposals do nothing to compensate leaseholders for the thousands of pounds in commissions already pocketed by landlords. Having finally acknowledged that leaseholders have not been getting ‘fair value’ the FCA needs to recognise that retrospective justice is required and set about securing this. The hidden commissions scandal should be recognised as being on a par with the PPI mis-selling scandal. It needs to be fully investigated by the FCA, with fines imposed and leaseholders compensated. 

*The FTT ruling only applies to the 98 leaseholders who were party to the S.27A application, and is being appealed by the Landlord.