Ian Reid Managing Director of Brevent Insurance, the leading independent block of flats insurance specialist explains why Resident Directors should pay much closer attention to their insurance arrangements now, especially as in many cases they represent 15-20% of the annual service charge.

It’s a fact of life isn’t it? Insurance premiums automatically cost more every year. Well it’s not necessarily so. In the past few weeks, our team have helped Resident Directors achieve premiums that were significantly lower than their current renewals from their existing insurers, and that very importantly took into account the increased rebuilding value of their property.

How? Quite simply because there is a lot of competition by insurers to win and retain good property insurance business. If you have a well run property and you expect or have accepted insurance premium increases in the past year why automatically accept them without checking the current market price? By testing the current insurance market you may find that you could save hundreds or even thousands of pounds.

Following your test, you may reassured to find that you already enjoy a very competitive market premium that only moves up in cost in line with the inflationary pressures associated with the potential rebuilding cost of your property.

Or it may reveal that due to the automatically calculated increase in the rebuilding cost of your property applied by the insurer, that you have an artificially high rebuilding value due to the inflation adjustment and it means your paying for more cover than you require.

Then again it might reveal that its not been in another parties interest to see your premiums reflect the current market prices. Some Resident Directors reading this will say “Well my freeholder controls where our property insurance is placed, so I cannot do anything about it anyway.”

Actually you can, and you might want to once you’ve established the current free market pricing for comparable premiums. Read on to see how. It’s not that difficult to test your premiums against the current market pricing using your existing property rebuild value.

Find out about your recent property claims history and details of how your property is constructed e.g. brick walls, wooden upper floors and tiled roof.

Obtain a copy of the current insurance certificate including the most recent REBUILDING value of the property (sometimes referred to as the declared value by the broker/insurer) used to calculate your premium.

If the certificate only contains the SUM INSURED figure, contact the broker/Insurer to obtain the REBUILDING VALUE used to calculate the current premium.

Obtain two or three competitive like for like quotations from different block of flats specialist brokers, making sure that you ask them for a feature by feature comparison with your current policy. This will provide you with a good indication of how your current premium compares to the current market price.

Very Important – If you do have freeholder directed insurance, do not tell the broker this as a) they may not put as much effort into seeking and providing a good market premium on the basis that they’ll assume its not likely to turn into business for them or b) they may not even provide a quotation for you to compare. Having followed steps 1 to 3 you’ll have a good idea of how your current premiums compare based on the rebuild value that you’ve been using.

I would recommend that at this stage if you’ve not had your properties rebuilding costs properly assessed by a suitably experienced Chartered Surveyor in the past 3 to 4 years, then it might be a good time to have the rebuild value assessed to make sure that you have the right amount of insurance protection in place as well.

TIP - If you have an impending renewal and you are going through this exercise I’d suggest that you wait for your renewal premium from your current broker/insurer and compare this against the other premiums in order to make up your own mind about how well they are looking after your interests and to decide if they deserve you and your neighbours future business.

Taking up another broker’s lower priced offer

If the management company can make its own insurance arrangements without freeholder intervention, then it is up to you and your fellow Directors to decide where the policy is placed next time. If you are unsure about whether this is the case check your lease.

If you have a managing agent and they to dissuade you from taking up a lower priced premium from another broker then try and get to the bottom of the real reason for this apparent reluctance. Some managing agents have their own insurance broker as a sister business and may be very reluctant to lose the business outside their group for their own financial reasons.

Then again it may be because they’ve spotted something in the policy that may place the Landlord and Leaseholders at risk and you’d be wise to understand what this is. If they use an excuse citing the FSA as the cause of their reluctance for trying to prevent you to taking up another broker’s offer rather than the one they have obtained, ask them to put the reason/s in writing to you which you can then personally check with the FSA.