The great home indemnity insurance rip off
David Lawrenson of www.LettingFocus wonders about the profits the indemnity insurers are making, in this article on “The great home indemnity insurance rip off”. He also queries why the main personal finance and property press have not made more of this.
The Great Home Indemnity Insurance Rip Off
Here is a very common scenario for anyone buying a home. ….
They have gone through the legal process and from the responses provided by the seller, (and possibly from the buyer’s own observations), it is clear that some installation works have been done at the property. But no buildings control certificates are available.
It might be that a new boiler was put in or it could be new windows were recently installed or it could be that the electrics were upgraded.
On a property I am buying right now, the seller’s responses say that a new consumer unit was put in, but he’s not clear about when this work was done.
As part of checks that I did before making my offer, my electrician says that the work must have been done within the last two or three years. Fortunately, he can tell this from the newness of the consumer unit that’s in the property now, clever man that he is!
This is also confirmed by the tenants who were still in residence when I first came to view it. Funny then, that the landlord has no recollection, but I digress!
The trouble is that since 2005, for significant electrical work like this, a certificate should have been obtained from buildings control at the local authority.
But the problem is that getting the certificate is just one more thing do do – and boring admin too – and lots of tradespeople cannot be bothered to do it.
Home Indemnity Insurance – Consequences of No Certificates
There are supposed to be consequences for not obtaining the certification, but the fact is that the local authorities have better things to do than following up these issues. More on this in a minute.
According to NICEIC, one of the trades bodies for the electricians, they tell me they require all their members to certify their work etc etc…. I’m sure they do, but I guess NICEIC only check a sample of their members work – and no doubt the member picks a job where he/she definitely applied for and got the certificates through.
So, where does that leave me?
Well, in the case of this property, my solicitor is following it up. That’s what they do because that is what they are trained to do.
Eventually, the solicitor will probably write to me and tell me that despite their best inquiries, there is no certificate available for the works and suggest I get indemnity insurance.
So, what is this indemnity insurance?
Well, it is supposed to offer protection in case the local authority come knocking and ask about the certificate. The cost of home indemnity insurance for covering not having a certificate for electric work may be say, thirty or fifty quid, maybe more and it lasts for life and can be transferred onto the next buyer.
The next argument is this: Who should pay for the insurance?
Well, many people would say as it is the seller who should have got it in the first place, then he should pay. But if the seller is being awkward, the buyer can often end up paying for it.
Indemnity Insurance Costs
Of course, as this kind of thing turns up pretty late in the conveyancing process AND because it can break a chain AND as a property is costing many, many multiple times the cost of the insurance, most people just cough up and pay it.
In my case, my Sparky ran some tests and found the installation to be sound. There appears to be no problem with it.
But should I still get the insurance?
Well, I would say no, because the chances of the local authority turning up and asking to inspect it are as rare as seeing Shergar gallop down the street, or spotting Lord Lucan buying a bottle of Cab Sab in my local Waitrose……or even seeing Lord Lucan riding Shergar into my local branch of Waitrose.
Of course, if I was buying with a mortgage, it would be a different matter. The mortgage lender, with their “Computer Says No” attitude would insist on there being indemnity insurance in place.
Of course, chasing buildings control certification down for something like a big house extension makes sense in ALL circumstances. You would not want the local authority inspectors coming round and telling you the extension on the lovely place you have just bought was illegal – and would you mind knocking it down please.
But if it was something like a gas combi boiler or a new electric consumer unit or new windows, in my view, as long as the thing is safe, i.e. Gas Safe Registered certificate for the gas boiler and test certificates for the electrics, then what’s the point of getting indemnity insurance?
I scoured lots of websites where this sort of thing was discussed and all the experts agreed that these insurances were never claimed on anyway, which is why the policies are so cheap. (Remember, most are for life on a property and appear to be transferable to new buyers).
Home Indemnity Insurance Profits
So it seems the insurers are making a lot of money on these home indemnity insurances – getting the income and almost never facing claims. And no doubt the conveyancers are bagging a commission each time they recommend one.
This is all a huge and rather silly rip off.
One could argue that what should happen is that the government should give local authorities the resources to follow these things up. There should be proper fines for not having the certifications.
But like so many things that go on in the private rented sector, it’s just another example of a bit of bureaucracy that has been put in place to make government “look good”, but which no one is enforcing. And in the case of indemnity insurance, the insurers continue to clean up by flogging indemnity policies that are never claimed on.
The other solution (in the event that no one is going to enforce) is to just scrap the need for certification anyway for these sorts of works.
It is all utterly bonkers! This is a scandal that really needs to be highlighted more in the mainstream press. You read it first here!
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