Insurance normally represents one of the largest service charge expenses facing a block of flats and handling insurance claims one of the most regular activities.  The manager should therefore be seeking to ensure that the insurance meets the client’s requirements both in terms of the lease obligations and general expectations.  The claims handling should preferably be tailored to minimise bureaucracy and speed up settlements where possible. This is one of the most common points of contact between manager and leaseholder and good procedures can help raise the manager’s profile positively. Delays tend to frustrate and annoy.

Most property managers will have a relationship with a firm of brokers either sharing the administrative arrangements (and commissions) or by referral.  Whatever the arrangement it is essential to demonstrate to leaseholders that they are receiving value for money.  This means going to the market every year to obtain competitive proposals for comparable cover rather than simply renewing with the same insurer regardless.  This also tends to minimise the effects of index linking.

Are you adequately insured?  When was the last time a building reinstatement valuation was carried out?  Regular review of the sum insured by a surveyor is essential rather than rely on the insurers own index linking.  When it comes to the crunch insurers insist it is the responsibility of the insured to provide the reinstatement value.  Every three years preferably is recommended for valuations.

Is your cover adequate?  Does it include alternative accommodation?  What does “loss of rent” cover?  What are the policy excesses and could premiums be reduced if these are reviewed? If there are few claims in number but these tend to be large adjusting the policy excess will not make much difference.  A large number of claims may produce a different result.  Make sure all other restrictive clauses are checked.  Large or unusual claims tend to focus the insurers attention to small print.

Do your insurance arrangements provide satisfactory contingency plans for disaster type situations or will residents be left to fend for themselves, claiming costs back later?  Most insurers will now provide a help-line number to deal with those emergency calls outside normal working hours.

Lastly, how should commission be treated?  In the end this should be a matter for the manager and client to agree between themselves.  If the manager is involved in insurance related work, including registering with the FSA or an approved scheme, than it is right he should be reimbursed for this.  Receiving some of the payment insurers routinely make to brokers or other intermediaries can actually help to keep management costs down.  Transparency is of course the answer and the manager’s remuneration should be looked at openly with the client.  Quoting a management fee at two levels, with or without insurance related work, is one way to do this.  Trying to supplement income on the side without accountability only lends credence to suspicions that premiums may be higher than they need be because of the commission element (another good reason for annual market testing).  A good broker or agent is still likely to achieve better value cover, even with commission included, than the client c