The City watchdog has urged insurance firms and brokers to work with it to ensure bills are fair after communities secretary Michael Gove said residents of almost all flats were facing “crippling” premiums in the wake of the Grenfell fire tragedy.

The Financial Conduct Authority (FCA) said on Friday that it wanted to establish that bills “fairly and accurately reflect risk” amid fears leaseholders in buildings with cladding that has been deemed unsafe are being ripped off.

Many such people have also suffered through an inability to move home since the Grenfell blaze, which left 72 people dead in 2017, threw a spotlight on the safety of exterior building materials.

Efforts to solve the cladding issue have dragged but Mr Gove sought to “reset” the government’s approach by removing the financial burden from residents of lower-rise buildings earlier this month when he confirmed builders would have to foot the bill.

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The COVID-19 pandemic has also dented demand for flats – further suppressing their value.

The FCA said it had written to insurance industry chief executives amid Mr Gove’s call for an investigation into the insurance costs which, he said, had seen bills double year-on-year in some cases.

“The letters outline the work which includes examining firms’ approaches to pricing for multi-occupancy buildings and whether elements unrelated to risk such as commissions are driving up costs,” the regulator’s statement said.

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“The letters also remind firms of their obligations under our rules, including to consider the costs borne by leaseholders when determining whether a product is fair value.

“We are asking firms to consider what actions they can take to help leaseholders, whether individually or by identifying collective solutions as an industry.

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“This work will be done with the Competition and Markets Authority where appropriate.”

Mr Gove said he had asked for the review to establish within six months any underlying causes for the price increases and figure out why insurance options are limited for customers in multi-occupancy buildings.

He spoke of worries that cover was even being denied to leaseholders in some situations.

Mr Gove added: “I have been particularly concerned to hear of cases where insurance premiums have escalated by over 100% year on year, leaving residents with crippling costs.

“It is clear to me that the insurance market is failing some leaseholders.

“Understandably, many policyholders do not view the market as effectively delivering accessibly priced, widely available insurance. I share that view, and do not consider this an acceptable situation.”

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