‘Tied tenants are not yet fully accessing insurance price match rights’

By Fiona Dickie - pubs code adjudicator

- Last updated on GMT

Insurance rights: In her latest column, pubs code adjudicator Fiona Dickie seeks to ensure that tenants know their pubs code rights on premises insurance
Insurance rights: In her latest column, pubs code adjudicator Fiona Dickie seeks to ensure that tenants know their pubs code rights on premises insurance

Related tags Legal Legislation Insurance Pubs code Pubs code adjudicator

The pubs code is not just about market rent only. I want to highlight code rights relating to insurance which apply each time the pub company signs a new tenant or buys and charges a tied tenant for insurance for the pub.

These rights are about transparency, so new tenants sign up with their eyes open.  

They are also about competitive pricing for pub company insurance for the premises, as the code gives tied tenants a right to price match.

This is an important area and one that I am concerned tenants do not know enough about. 

Tenants information rights

When tenants first take on a pub, the pub company must be clear about any insurance obligations. 

The tenant must be told whether they or the pub company are responsible for arranging the insurance for the premises, and in those circumstances where the pub company is responsible, whether that cost will be recharged to the tenant. 

They must also be given details of any tie for insurance.

When making a charge for premises insurance, the pub company has to disclose if it is receiving commission. 

It must also say if it is charging the tenant more than the premium it is paying. 

Because the pub company may insure a large portfolio on a single policy, I’ll want to understand how they are identifying a charge per pub.

Price match right

Any pub company recharge to the tenant for premises insurance cannot be more than a quote for a suitable comparable policy which the tenant provides. 

To ensure the tenant is in a position to find such a quotation, the code requires the pub company to provide all necessary information, including full details of the policy, cover, charges and excesses. 

The tenant must then have at least a 21-day window to seek comparable quotes if they wish before the pub company puts the insurance in place. 

If the tenant finds suitable alternative insurance that is cheaper the pub company must either purchase that policy instead or charge the tenant only the lower amount.

Accessing these rights

Evidence suggests that tied tenants are not yet fully accessing these rights, and that awareness of them may be low. 

Pub company compliance reports, for example, show that for the year 2019/20 no tenant of Marston’s, Admiral or Star price matched their insurance in this way, while one Punch tenant and three Greene King tenants did. 

The picture was a little different for Ei Group in the year before it was taken over by Stonegate, with 33 tenants having their buildings insurance recharge reduced during that year following a successful challenge.        

Clearly, there is work here for me to raise greater awareness of these rights, and to ensure compliance. I’ve made a start by publishing a new fact sheet on insurance which is available on my website – www.gov.uk/pca​.

Comparable Quotes

In order to price match, the tenant’s quote has to be a suitable comparable; the code doesn’t define what that means. 

I’d like to know more about the reasons why pub companies may reject a tenant’s quote as unsuitable, so I can understand how these rights are being complied with.

It isn’t clear how easy it would be for tenants to get a comparable quote for buildings insurance. 

A broker may not have an interest in spending time finding one if a pub company may be much more likely to cap the recharges rather than give the business to the broker by taking out that comparable policy for the pub. 

Perhaps tenants who already use a broker for their business insurance (for things like employers’ and public liability) will have an existing relationship they can use to help with price matching on buildings cover.

I’ll be looking more closely at all of these issues in 2021 and talking about them to the industry. 

  • This column is intended to aid industry understanding about the pubs code and its impact. Nothing in it should be understood as a substitute for the pubs code legal framework.

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