For many Resident Management Companies (RMCs), Right to Manage (RTM) companies, freeholders and managing agents, insurance renewal has become one of the most challenging conversations of the year.
Across the UK, many blocks of flats have experienced a significant increase in buildings insurance premiums – even where there have been no recent claims. For leaseholders, receiving notice of a higher insurance cost can be frustrating, particularly when it feeds into higher service charges.
Without clear explanations, residents may assume poor management, inadequate shopping around or unnecessary expenditure. In reality, the picture is often far more complex.
While no one welcomes rising costs, open and transparent communication can help residents understand why premiums have increased and what has been done to secure appropriate cover.
Why Are Insurance Premiums Increasing?
Insurance premiums are influenced by a wide range of factors, many of which are outside the control of building managers. One of the biggest drivers has been the rising cost of rebuilding residential buildings. Construction materials, labour costs and professional fees have all increased substantially in recent years. If the cost of rebuilding a block rises, insurers must reflect that increased exposure in the premium.
Claims experience is another important factor. Escape of water continues to be one of the most common and expensive causes of claims in apartment buildings. Even relatively small leaks can affect multiple flats, resulting in significant repair costs and disruption. Fire claims, although less frequent, can also be extremely costly. Combined with stricter fire safety expectations following Grenfell, insurers have become more cautious when assessing residential risks.
The insurance market itself has also changed. Some insurers have reduced the number of residential blocks they are willing to insure, particularly where buildings present higher levels of perceived risk. Reduced competition can contribute to higher premiums across the market. In many cases, premium increases are therefore the result of several factors coming together.
Residents Naturally Ask Questions
When insurance costs rise, residents are likely to want answers. They may ask why the premium has increased so much, was the market tested, are we overinsured, should we switch brokers?
These are reasonable questions, and boards should be prepared to answer them openly. Responding with clear information rather than technical insurance terminology helps residents understand the increase.
Start the Conversation Early
One of the biggest mistakes is waiting until service charge demands are issued before discussing insurance costs. Instead, managing agents and resident directors should communicate early if significant increases are expected.
Providing advance notice allows residents to understand the wider market conditions before invoices arrive. It also demonstrates that the board is managing the issue proactively rather than reacting at the last minute.
Even where final figures are not yet available, explaining that the insurance market remains challenging can help manage expectations. Early communication often reduces frustration later.
Keep Explanations Simple
Insurance is a technical subject, but resident communications should not be. Instead of discussing underwriting cycles or actuarial models, explain the main factors in straightforward language. Simple explanations help residents understand that premium increases are often market-wide rather than unique to their own building.
For example:
- Rebuilding a block of flats now costs considerably more than it did a few years ago.
- Insurers have seen more costly escape-of-water claims across apartment buildings, making them more risk-averse.
- Some insurers have reduced the number of blocks they insure, meaning there is less competition in the market.
- Buildings with higher fire safety risks often attract higher premiums.
Use Examples from the Building
Residents often respond better when information relates directly to their own block. Where appropriate, explain factors such as:
- Recent claims history.
- Improvements made since previous renewals.
- Maintenance undertaken to reduce risk.
- Fire safety improvements.
- Upgrades to security or leak prevention.
If the building has experienced several escape-of-water claims over recent years, explaining how these affect insurance pricing provides useful context. Similarly, if significant improvements have been completed to reduce future risk, highlighting this demonstrates that the board is actively working to improve the building’s insurance profile.
Demonstrate That the Market Has Been Tested
One of the most reassuring messages for residents is that the insurance market has been thoroughly explored. Boards and managing agents should be able to explain that:
- Multiple insurers or markets were approached or explain why not.
- Different options were considered.
- The chosen policy provides suitable protection for the building.
- The decision was based on both price and quality of cover.
The cheapest premium is not always the best option. Policy limits, exclusions, excesses and claims service all need to be considered. Explaining this helps residents understand that insurance purchasing is about value as well as cost.
Explain Why Adequate Cover Matters
When premiums increase, some residents may suggest reducing the level of insurance cover. But underinsuring a residential block can create serious financial risks. Buildings should normally be insured for their full rebuilding cost, including demolition, debris removal, professional fees and compliance with current building regulations.
If the building is insured for less than its true rebuilding value, leaseholders may face significant financial shortfalls if a major loss occurs. Explaining the purpose of adequate rebuilding valuations helps residents understand why maintaining appropriate cover is essential.
Handling Difficult Conversations
Insurance discussions can sometimes become emotional, particularly where service charges increase significantly. The most effective approach is to remain factual, transparent and consistent.
We suggest:
- Acknowledging that premium increases are frustrating.
- Explaining the wider market context.
- Providing evidence where possible.
- Avoiding technical jargon.
- Answering questions honestly.
- Providing opportunities for residents to ask further questions.
Looking Beyond the Premium
Premium discussions also provide an opportunity to talk about risk management. Measures such as leak detection systems, regular roof inspections, improved fire safety and planned maintenance can all help reduce the likelihood of future claims.
While these improvements may not deliver immediate premium reductions, they contribute to a stronger risk profile over time. Sharing this longer-term strategy helps residents understand that insurance is not simply an annual purchase. It is part of a wider approach to protecting the building.
Conclusion
For RMCs, RTM companies, freeholders and managing agents, the key to navigating insurance premium increases is communication. Starting conversations early, explaining costs in plain language, demonstrating that the market has been tested and showing how risks are being managed all help build trust with residents.
While higher premiums may be unavoidable, confusion and mistrust are not. Clear, honest communication allows residents to understand not only what has changed, but also why protecting their building with the right insurance remains one of the most important investments they make.
