Shabana has written again to the Financial Conduct Authority on the cladding scandal, after a disappointing response to her letter calling for an investigation into the conduct of insurers.

In March, Shabana wrote to the Financial Conduct Authority (FCA), stating her understanding that regulatory failure is precipitating a scenario where insurance companies can act within the rules of the market, but without offering a fair premium to those affected by the cladding scandal.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, responded to the letter deferring their responsibility, in correspondence which neglects to offer criticism of the conduct of insurers.

Dissatisfied by the response, Shabana has now written once again to the FCA, restating her initial calls for an investigation into the conduct of insurers, and reminding the FCA of their remit is to work in the interests of consumers, and not in the interests of the finance and insurance industry.

Shabana has also written to the Economic Secretary to the Treasury, expressing her disappointment in the response from the FCA.

You can read both of the letters in full below.

Letter to the Financial Conduct Authority

Dear Christopher Woolard,

Thank you for your letter of 10 March 2020, responding to my questions regarding the cladding scandal.

In my letter I informed you of the incredible hardship encountered by my constituents, who are facing mounting bills to address cladding works on their leasehold properties. I explained that their financial insecurity has been compounded by the conduct of insurers, who continue to issue onerous demands upon my constituents to ensure leaseholders policies are not voided. I understand my constituents have an immediate need to raise £3million to meet some of these demands before an impending deadline from insurers. Circumstances of the Covid-19 pandemic have only served to heighten their feelings of anxiety about their personal finances.

I was incredibly dissatisfied to read your response, which does not indicate the sufficient urgency required to investigate the financial burden unduly placed upon my constituents. In your response you outline the processes undertaken by insurers to determine risk in order to inform the calculation of premiums. To be rather blunt, it is up to the insurers to defend their processes and practice, and it is up to the Financial Conduct Authority to stand up for citizens and regulate financial conduct.

The purpose of the FCA, taken from its own website, is as follows:

“Financial markets need to be honest, fair and effective so that consumers get a fair deal.

“We aim to make markets work well – for individuals, for business, large and small, and for the economy as a whole.”

The insurance market is not working well for individual leaseholders affected by the cladding scandal. I continue to lobby the Government to take faster action to address the immediate concern of financing pending remedial works to make their leasehold properties safe. However, it is surely the responsibility of the FCA to proactively investigate alleged bad behaviour of the insurance industry, rather than act against the interests of consumers by accepting the prima facie promises of insurers.

I continue to believe that regulatory failure is precipitating a scenario where insurance companies can act with impunity, charging unfair premiums to those affected by what is a national scandal.

I have written to John Glen MP, Economic Secretary to the Treasury, whose portfolio covers financial services including insurance, expressing my disappointment that the FCA is not adequately representing the interests of my constituents.

I welcome any further response to my original correspondence, which I enclose for your review.

Shabana Mahmood MP

Member of Parliament for Birmingham Ladywood

Letter to the Economic Secretary to the Treasury

Dear Economic Secretary to the Treasury,

I am writing regarding my recent correspondence with the Financial Conduct Authority relating to the cladding scandal, which I enclose for your review.

Over the last six months I have had correspondence with a number of constituents about cladding on leasehold properties. My constituents are a number of leaseholders representing a site in Birmingham, Ladywood with over 140 flats. The leaseholders are deeply concerned about the cladding used on their building but are unable to undertake the necessary works to remedy the situation without significant financial cost. I have made many representation to the Government regarding their concerns.

Earlier this year Westminster Hall debate brought to light further issues regarding the cladding on leasehold properties, namely issues around building insurance premiums and directors’ liability insurance.

I am informed that the insurance premium at the site in Birmingham has already more than quadrupled, and like the estimated £6 million it will cost to remedy the cladding, the cost has fallen on individual leaseholders. As no individual insurer is prepared to insure the building, a consortium of five insurers is currently providing cover. I understand my constituents have to address continued onerous demands from insurers, each with their own particular conditions regarding the state of the building, to ensure their policies are not voided. I understand my constituents have an immediate need to raise £3million to meet some of these demands before an impending deadline from insurers.

I wrote to the Financial Conduct Authority, asking them if they would be prepared to investigate the cladding scandal, or at the very least make a statement regarding the actions of the insurance industry. I explained that regulatory failure is precipitating a scenario where insurance companies can act within the rules of the market, but without offering a fair premium to those affected by what is a national scandal.

I was incredibly dissatisfied to receive a response from Christopher Woolard, Executive Director of Strategy and Competition at the FCA, which does not indicate the sufficient urgency required to investigate the financial burden unduly placed upon my constituents. In his response he outlined the processes undertaken by insurers to determine risk in order to inform the calculation of premiums. As I have bluntly explained in my response to Mr Woolard, it is up to the insurers to defend their processes and practice, and it is up to the Financial Conduct Authority to stand up for citizens and regulate financial conduct.

In light of my recent correspondence, please could you restate the responsibility of the Financial Conduct Authority to proactively investigate alleged bad behaviour of the finance industry, including insurance. I would be grateful if you could outline what steps the Treasury plans to take to address my concerns, and those of my constituents, regarding this particular issue.

Shabana Mahmood MP

Member of Parliament for Birmingham Ladywood