Agents hit with 300% hike in Client Money Protection costs just weeks ahead of mandatory requirement

Agents are being hit by big hikes in Client Money Protection, ahead of it becoming a legal requirement just weeks away, on April 1.

ARLA has defended the increases.

But shopping around appears to show that regulated agents – those belonging to a recognised trade body – might have to pay more than unregulated firms, who belong to no membership association and are bound by no codes of practice.

One agent has told EYE that when sent an invoice for over £1,000 from ARLA for its CMP insurance, they had looked at other options – including ARLA’s spin-off, Money Shield, which offers the insurance to non-members.

The ARLA agent, who has requested anonymity, says that when they talked to Money Shield, claiming that they did not belong to a regulated body but usually held £1m or more in their client money account, they were quoted £450 for insurance.

Separately, one ARLA agent told EYE that their new bill is over 300% higher, at over £1,020.

Mark Crampton Smith, managing director of College and County which has two offices in Oxfordshire, had been paying ARLA Propertymark the flat rate of £340 a year.

Crampton Smith said he was concerned that the huge jump might be because ARLA – which asked agents to back its campaign for mandatory CMP – now offers the insurance to non-member agents via Money Shield.

When he complained to ARLA about the new price, he says he was told that it related to the amount of client money his business holds.

He says he was also directed to an open letter explaining the new pricing structure.

This says that because of the nature of mandatory CMP as from April 1, Propertymark has been required to increase its insurance cover which has had a “dramatic impact” on the costs associated with the scheme.

http://www.propertymark.co.uk/cmp-letter-2019

However, Crampton Smith says that this year’s letter is in marked contrast to last year’s, when Propertymark did not increase its £340 CMP levy, saying it had never been more important to deliver value for money for its members.

http://www.propertymark.co.uk/cmp-letter-2018

Crampton Smith told EYE he is extremely angry about this year’s unexpected hike.

He said: “I am disappointed that ARLA has not been able to ring-fence the risk that regulated agents pose in terms of CMP.

“The risk to their insurers has not changed after all.

“Last year, I did as requested by David Cox and responded to the consultation on CMP, but I had no idea that their intention was to extend their CMP to unregulated agents.

“Last year they made a big thing about keeping the levy the same, citing the impending tenant fee ban.

“To increase it by 300% a couple of months before implementation is a bit ironic.”

David Cox, CEO of ARLA, told EYE yesterday: “I can well understand members’ frustration at the increase in the CMP levy.

“It was the last thing we wanted to do when we are so conscious of the cost pressures agents are under with the tenant fees ban.

“However, Propertymark has been required to increase its insurance cover ten-fold.

“This has had a dramatic impact on the costs associated with the scheme, and whilst we have not increased the CMP levy in two years, in order to apportion costs realistically to reflect the potential risk, a graduated CMP levy based on the amount of money in their client accounts has been introduced.

“For most members the CMP levy has only gone up by £20.

“For the levy to rise to over £1,000, it means the agent has over £1m in their client account.

“Also, I can assure members that Money Shield has no impact at all on the Propertymark CMP levy.

“The two schemes are entirely separate, with different insurers and run off separate IT systems.”

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14 Comments

  1. charlie.wright

    Custodial deposit protection schemes make by far the most sense. No CMP insurance required, no cost to use them, less admin, no audit requirements and tenants are better protected.

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    1. DASH94

      I use the DPS custodial scheme and I still have to have CMP – and proper clobbered on the premium I was  too!

      It can’t offer better protection for tenants unless it’s audited in some way surely?

       

       

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      1. Robert May

        For 17 years it has been possible to automatically audit reconciled client cash accounts month by month. For 15 years it has been possible to  automatically report SA105 L&P income
        For some reason there is  a determination that technology is not allowed to identify  theft from clients,  money laundering or tax evasion.
         
         

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    2. Peter

      I am afraid the thumbs down is from me.

      Custodial scheme _ Yes, no issues there.

      CMP – Still required as rents are received, deposits pending lodgment as well as for contractual tenancies, working floats, tax retention, funds set aside for settlement of contractor invoices etc.

      Less Admin – Still need to do audits to double check funds held in custodial shceme match your records, as you will with bank reconciliation.

      No doubt using a custodial scheme has contributed to us only getting the £20 increase in this year’s premium.

       

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    3. KC54

      I am with The Dispute Service.  They cover the deposits with their insured scheme.

      Isn’t CMP for the rest of the client monies held i.e rents??

      For my renewal NALS recently requested the highest client funds held in the past year after deposits have been deducted.

      ALL client monies need protecting, not just deposits

       

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    4. Woodentop

      Ooopps seems Charlie you need to read up on CMP.

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    5. jeremy1960

      Do you have a client account?  If you do, you have to have cmp. The cost has risen because insurance companies expect claims against companies like yours and others that have never had protection.

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  2. smile please

    As I have been saying for a long time now, regulating our industry will be a license to print money which is why groups such as ARLA are pushing for it.

    This is just the start.

    An industry within an industry. And we have Turkeys voting for Christmas.

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  3. Robert May

    Basic economics, when ever competition is deliberately excluded from providing goods and services the price of the goods and services is artificially high.

    I think it is  very much in the public interest if agent were to enquire of the government how many  firms have passed  its criteria of unlimited liability  for  claims, how many underwriting firms are competing for this mandatory insurance.

    I have been excluded from providing client money protection to my agents simply because I cannot find an underwriter who is able to comply with obviously flawed and impractical criteria. To me the lack of alternative to effectively  a single provider  was always going to result in premiums far higher than they should be and in my book that’s anti competitive  & breaches CMA regulations.  I’m not fussed to pursue the matter the government has ticked its own box and any attempt  at correspondence is met with their usual  dismissive  and obstructive attitude.

     

    Regulation should not be a profit centre for anyone or any organisation. In the same way as letting  and referral fees have come under the scrutiny of transparency perhaps it is only right and proper that the profits of providing this insurance  are monitored. What is the risk , what is the cost, err why is the premium …… HOW MUCH?

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  4. AgencyInsider

    Contemplating some heroic thievery I reckon that paying a grand in order to have the facility to skidaddle with a million is a fine deal.

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  5. Oliver Wharmby

    Regulation is supposedly coming in over the next few years and insured deposit schemes are supposedly going to be phased out.

    I don’t believe it was the intention to ever introduce insured deposit schemes in 2007 however we all know why they were introduced and CMP was born off the back!

    All this legislation is designed to cleanse the sector ahead of regulation. Its taken twelve years to get this far and counting.

    We understand there are circa 4,000 English agents without CMP. Whether they can actually obtain CMP is an interesting question and if they can’t, who is policing them with so little resources.

    The amount of agents requesting PI who don’t even form part of a redress scheme is frightening!

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  6. Woodentop

    And the fall out has started, at the late hour … from one CMP provider ..    
     
    After twelve months of dialogue with MHCLG and with still so much uncertainty, we have lost confidence in the way CMP is being legislated and therefore cannot reasonably continue to provide a CMP scheme to agents in England.      
     
    Your PI and CMP policy shall remain in force, however the CMP section with effect from 01.04.2019 shall NOT be compliant and therefore alternative CMP shall need to be arranged with an approved CMP scheme. The PI is not affected.

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  7. drasperger

    Small unregulated agents who are going to have to buy CMP are the highest risk for the underwriters and re-insurers. With the tenant fee ban coming into force in June it is clear that there will be far greater chance of business owners vying client monies to business accounts.  There may well be more cases of businesses using client monies to prevent winding up or worse.  This increased risk is the driver for increased costs.  It is extraordinary that a business the size of Propertymark has neither the skills nor cognisance to see this coming when they wished for compulsory CMP and ensure proper protection for their members/customers.

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  8. HIT MAN

    Getting as bad a RM with a stranglehold on agents.

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