Letting and management agents can earn high levels of commission by arranging home insurance for residential landlords.  This commission can be up to as much as 40% of the overall premiums charged by the insurance companies.

This isn't necessarily a problem if the agent is open and transparent about the commission that they are earning and then either refunds the commission to their clients or openly treats it as part of their overall charges. 

However, RICS is concerned that less than scrupulous agents simply keep the commission without the landlord or tenant (who pays the premium) even being aware that it is being paid.

RICS is currently looking at ways to address this situation.  A number of initiatives are underway and we are already talking to our members with a view to providing guidance on best practice.

RICS already regulates many residential managing agents, under the Financial Services Authority (FSA) regime for general insurance mediation.  Under the FSA's requirements for professional body members, those firms are obliged to declare all commission to clients.

In fact, the basis of this declaration is that the commission already belongs to the client and may only be retained by the agent with the client's consent.  In practice, this will mean written consent in all but the most exceptional cases.  RICS requires all its members and those firms it regulates to be open and honest in their dealings.

This is just one of a number of issues that RICS is attempting to address as part of a residential property initiative.  Working closely with the National Association of Estate Agents and the Association of Residential Letting Agents, we have invited Sir Bryan Carsberg to look at how the residential sector regulates itself and, amongst other questions, whether this could be achieved more effectively through a statutory framework.

This initiative will provide an ideal opportunity to address the difficult question of insurance commissions in the context of a comprehensive review.