We are providing this fact sheet to explain the basis upon which we provide indemnity insurance.
This is necessary because the European Union has enacted a new directive designed to impose duties on those who sell insurance policies even where the sale of a policy is entirely secondary to the principal transaction - the sale or purchase of a property.
The EU's stated aim is to provide consumers and retail investors with:
- greater transparency in the price and costs of insurance products
- a simple, standardised insurance product information document (IPID) providing clearer information on non-life insurance products, so that consumers can make more informed decisions where insurance products are offered in a package with another product or service, for example when a new car is sold together with motor insurance, consumers will have the choice to buy the main product or service without the insurance policy
- rules on transparency and business conduct to help consumers avoid buying products that do not meet their need.
The IDD became effective from the 1st October 2018.
When we deal with property transactions, whether acting for a seller or a buyer, we occasionally need to deal with a defect in the title or an absence of evidence of some sort of regulatory control - for example the property we are selling has been extended and either planning permission or building regulations approvals for the extension cannot be found. In an ideal world we would always recommend obtaining compliance by getting any missing permissions but it is almost always quicker and cheaper to buy a one-off insurance policy designed to cover the risk that enforcement action is taken at some stage in the future.
We do not advise on indemnity insurance policies and we normally warn people that an indemnity policy is never as good as properly fixing the underlying problem - not least because the insurance company that issued the policy will decide how to fix the problem, if needs be, not the person for whose benefit the policy was written.
We often quote an example to make this point - a house with a conservatory had no planning permission for it. The Sellers offered indemnity insurance and the Buyers (against advice) agreed to accept it. Shortly after the sale was completed the council contacted the Buyers to say the conservatory did not have planning permission and, because of its size, it should have had it. The Buyers asked the Council what they would have to do to get permission and the Council said as the size of the conservatory breached planning regulations it would not be obtainable and the conservatory would have to be demolished. The Buyers referred the matter to the insurers expecting them to defend their right to enable them to retain it. Unfortunately the insurer decided the cheapest way of resolving the planning issue, at their expense, under the terms of their policy, was to demolish it. No conservatory = no planning breach. Not the result the buyers wanted - but the one delivered by the indemnity policy upon which they had relied.
If we are asked to accept an indemnity policy for you we will provide a copy of the policy to you together with the policy terms and any other details provided to us by the other party's solicitors - we will also advise you on the nature of the cover and its likelihood to be suitable for the stated purpose.
If we need to offer an indemnity policy for you we will usually source this from an online provider who will provide a demands and needs statement which we will refer to you for approval.
We do not obtain any commission on selling insurance nor do we benefit from this process in any way- if you need us to provide you with a range of insurance policy offers please let us know and we will seek alternate quotes for the insurance you are required to provide.
In practice we normally supply a policy which meets the aims of being readily available whilst being as affordable as possible.
There is one last point worth making. If we are thinking that an indemnity policy may be an acceptable alternative solution for an issue, we will not normally be able to take any steps to properly fix the underlying problem, including, for example, simply asking a local authority if they would issue a retrospective consent, without risking either that indemnity insurance will not be available or that the cost of it may escalate.