Leaseholders (Choice of Insurers) (Hansard, 16 January 1985)

§ Mr. Robin Corbett (Birmingham, Erdington)

I beg to move, That leave be given to bring in a Bill to allow a leaseholder to choose the company with whom he insures his dwelling from a list of approved insurance companies.

This is a small but none-the-less important Bill. Its purpose is to extend freedom of choice over property insurance to the leaseholders of about 1,400,000 flats and homes in England and Wales to whom this is denied. Landlords can and do dictate the company with whom leaseholders are required to insure. Certainly there is financial gain for the landlords by way of commission. It is not always the case that the commission is translated into lower premiums for the leaseholders. It may be argued that this compulsion is in the best interests of leaseholders who, where large numbers of properties are involved, can get acceptable cover for discounted premiums. That is about the best face which can be put on this dubious practice.

Let me give an example of what happens in practice, helpfully provided to me through the Consumers Association. Fountaine Freeholds Limited, which inconveniently operates from a post office box number in St. Helier, Jersey, wrote to a leaseholder saying it had bought the freehold of the property. The letter said: We have specific requirements as to Insurers and shall notify you of these in due course. In the meantime, and as so required by your Lease, please let us have your existing Policy of Insurance and the current receipt for premium.

A separate undated letter to the leaseholder said: Under the terms of your lease, you covenant with your Lessors (that is us) to insure your house and all other buildings which may be upon the land in the joint names of the Lessors and Lessees in some Insurance Office to be named from time to time by the Lessors to the full value thereof. Previous Lessors did not have a policy of directing insurance but with a view to good Estate Management, the policy of this Company is to have all freeholds owned by us insured in one office.

It then added threateningly: It may well be that neither you nor your Building Society will want to change insurers. We must make it very clear that no Building Society has the power to insist that you insure with any particular Company. We, as your Lessors, do have such a power"— the next words are underlined— 336 and we shall insist that our nomination be followed.

The letter went on: those who fail to carry out our direction as to insurance, will commit an immediate and serious breach of covenant in respect of which we shall serve Notice upon the Lessee under Section 146 of the Law of Property Act 1925 with a view to the commencement of proceedings to forfeit the Lease.

It warned: Your Lease also contains a provision for the Lessee to pay all the Lessors' costs, charges and expenses which may be incurred by the Lessors in or in contemplation of any such proceedings. These costs would be substantial. This high-handed action is all the more unacceptable in this day and age, because the cover insisted on by the nominated company was at the standard rate of 15p per £100—no bargain there for the leaseholder, but a nifty commission for the heavy-handed landlords.

As the British Insurance Brokers Association says about the lack of choice of insurers: Members of the public … could be forgiven for feeling that they are being forced to purchase something they do not want … They find themselves locked into a long-term financial arrangement which denies them a choice of borrowers from another institution". This practice is outrageous, unfair and extortionate. My Bill will put paid to it by insisting that leaseholders have the choice of not less than three insurers. This will help householders, encourage proper competition and will enable brokers and insurance companies to be able to bid for business which is now cosily enforced with the threat of the loss of a home to the leaseholders of almost 1.5 million flats and houses in England and Wales.