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Cladding scandal: insurance bills rise by more than 1,000% for flat owners

Leaseholders are struggling to pay the escalating costs of cover
Wicker Riverside in Sheffield

Residents of flats with cladding and other unsafe building materials are facing skyrocketing insurance bills, new Which? research reveals.

Leaseholders from 16 apartment blocks are paying an average of over 500% more for buildings insurance than they were one year ago, adding thousands to their annual service charges.

In one of the most extreme cases we've heard about, leaseholders living at The Decks, Runcorn, contacted Which? to say their premium had risen from £34,000 in 2019 to £254,000 in 2020 and £525,000 in 2021 - that's a 1,448% increase in just two years.

'There are people who are really, really stressed,' said Aileen Williams, 72, from East Sussex, one of the leaseholders we spoke to. 'I wasn't sleeping for weeks - it was all going round in my head.'

The numbers we've gathered and stories we've heard prove that, sadly, Aileen is not alone.

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How high are buildings insurance premiums rising?

We've heard from leaseholders across the country who have seen their buildings insurance premiums skyrocket after unsafe building materials were found during post-Grenfell fire safety surveys.

Some leaseholders are now paying upwards of £3,000 a year each for insurance that used to cost them just a fraction of that price.

For many, this is heaped on top of eye-watering 'waking watch' costs and looming remediation bills that could leave leaseholders bankrupt or homeless if unpaid.

The table below shows how insurance premiums rose between 2019 and 2020 for each building we heard from.

Listen:The Which? Money Podcast explains the building safety scandal and hears from struggling leaseholders in their own words.

An unavoidable expense

It's essential for leaseholders to have buildings insurance as banks will not offer mortgages on properties that are not covered, so people who own homes in these buildings have no option but to pay for it.

A building's freeholder will choose its insurance policy and pass the costs onto leaseholders through service charges, so leaseholders themselves are rarely if ever involved in choosing which insurer covers them. This means they can't shop around for cheaper deals like they could with, say, car insurance.

'From a leaseholder's perspective you don't see any of the negotiations,' said Matt Hodges-Long, founder of the Building Safety Register.

'You don't know who's been offering what, you don't know what the terms are. You just get told “this is your proportion of the bill” and it comes through in the service charge.'

Cutting back to pay rising premiums

When the insurance bill for The Landmark in Bexhill-on-Sea jumped 400%, each leaseholder's service charge doubled.

Aileen Williams, a leaseholder and chair of the building's Tenants' Association committee, told Which?: 'I would say probably about 60% of the residents in the building are able to pay the increased service charges. But there are certainly quite a high percentage of people living in the building who cannot afford to pay it. They're on a limited income, they're on pensions. Maybe they haven't got that much savings.'

To help fix the problem, the committee and the management company who collects the service charge held a meeting.

'We went through every item on the budget for this year, discussing it and agreeing between us where we could make other cuts because of the insurance premium,' Aileen said.

'We've reduced everything as much as we can in order to bring the service charges down as much as possible. But they are still going to be double. So if we hadn't cut other areas they would have been considerably more than that.'

'I cry every day about this situation'

Wicker Riverside in Sheffield wasn't even fortunate enough to secure the privilege of paying through the nose for insurance. When its policy came up for renewal, it was unable to secure cover from any insurer.

The lack of insurance means leaseholders will have to pay for any damage to the building themselves. Not just from possible fire, but from other risks like flooding. It is also likely to make switching mortgage difficult.

We spoke to Jenni, a leaseholder from the building, just after a flood warning had been announced for South Yorkshire. She was worried the building, which backs onto the River Don, would be damaged, and leaseholders would be billed for the repairs.

'People think leaseholders in this situation are being overdramatic. But I cry every day about this situation and my friends would describe me as a strong person,' Jenni said. 'It's just too much for people to be able to handle.'

Leaseholder Jenni from Wicker Riverside
Jenni from Wicker Riverside speaking to Which?

'When you can't get insurance at all it adds to the stress. Everything feels heightened because it's a case of, well, if something goes wrong I lose absolutely everything in one go.'

Is there any help for homeowners?

A spokesperson for the Financial Conduct Authority (FCA) - the regulator - said it expects insurers to assess buildings with 'due skill, care and diligence, paying due regard to the interests of their customers and treating them fairly'.

But Matt Hodges-Long from the Building Safety Register thinks the regulator should be tracking these price rises. 'The regulator's job is to make sure that the market is fair and operating not to the detriment of consumers,' he said. 'I think we've got a huge class of consumer here that lacks protection.'

The FCA spokesperson pointed out that different insurers use different approaches to set premiums, and that some of the FCA's proposed new rules for insurers would cover the sale of buildings insurance for apartment blocks.

Despite this, it's unclear whether this would in fact result in premiums becoming lower.

A spokesperson from the Association of British Insurers told Which?: 'Insurers understand and sympathise with the challenges some leaseholders are facing. Sadly, some types of cladding present a greater fire risk, which has to be reflected in the cost of insurance.

'Three and a half years on from the Grenfell tragedy, there is an urgent need for building owners and the government to ensure that buildings have dangerous combustible materials removed as soon as possible to make sure people are safe. Safer homes can be reflected in insurance costs.'

The government has announced a £1.6bn fund to pay for buildings to remove unsafe cladding and a £30m fund to pay to install fire alarms. Neither of these will directly help leaseholders to pay insurance costs.