Housing Secretary Michael Gove has written to insurers calling for them to make changes to the “failing” market to ensure that leaseholders are not being unfairly treated.

In a letter to the Financial Conduct Authority and Competition and Markets Authority, Gove said: “Since I took office, I have been extremely concerned to hear from innumerable leaseholders about the pressure they face from rapidly escalating building insurance premiums on high and medium-rise blocks of flats.

“I have been particularly concerned to hear of cases where insurance premiums have escalated by over 100% year-on-year, leaving residents with crippling costs. It is clear to me that the insurance market is failing some leaseholders.”

He added that he is “concerned” about insurers “unwilling to offer new policies” and therefore leaving leaseholders with limited or no option than to stay with their current provider.

Looking for an initial response within three months and full report by six months, Gove concluded: “Understandably, many policyholders do not view the market as effectively delivering accessibly priced, widely available insurance. I share that view, and do not consider this an acceptable situation.

“The market lacks transparency and there is not currently useful data to explain the rationale behind the increasing premiums charged by insurers and the conditions associated with the cover. The role and remuneration of brokers, managing agents and freeholders is also unclear.

“I require urgent advice on the scale and potential causes of the problem and what can be done to rectify these issues.

“My overall goal is for there to be a more affordable marketplace for buildings insurance that offers widely available and affordable cover for those who live in flats and other multiple-occupancy buildings.

“Therefore, I request that the Financial Conduct Authority (in close consultation with the Competition and Markets Authority) reviews the sector, in order to:

1. shed light on the underlying causes of year-on-year price increases; and
2. assess the causes of the marked restriction in coverage available for multiple-occupancy buildings.

“I also request the FCA make practical recommendations for measures that industry, the government and regulators could take to achieve the goal of widely available and affordable cover.”

In response, the CMA said: “It is clear that high buildings insurance premiums are a source of significant concern for many residents. For this reason, I welcome the request you have made for the FCA, in consultation with the CMA, to look into this.

“As you note, strengthening our understanding of what is driving high premiums will be key to taking effective action to protect residents.”