Strategic planning director says it is policyholders’ ‘responsibility’ to ascertain building valuation information to avoid underinsurance, but is there an implication that brokers are not doing enough here?
By Jon Guy
This week (February 2025), new data has been published by buildings valuation business RebuildCostAssessment.com which estimates that 80% of commercial properties in the UK are underinsured.
This has been a particular issue since the world emerged from the Covid-19 pandemic between 2021 and 2022, with the UK economy continuing to undergo a slow recovery following business lockdowns and supply chain delays.
As such, money has been tight for British businesses and insurance spend is always an area where there is a huge temptation to seek reductions, given the mantra of many company leaders being “it won’t happen to me” when it comes to needing to make a claim.
However, RebuildCostAssessment.com said the buildings underinsurance problem is not simply a result of the willingness of businesses owners to cut costs, but is – in fact – far more fundamental. It is quite simply the way property cover is sold.
The company’s strategic planning director, Johnny Thomson, explained: “Policyholders are asked how much they want to insure their building for. It is their responsibility to provide this. The result is guesswork and estimates that are often far below the true rebuild cost.”
To illustrate his point, Thomson likens the process to booking a flight: “Imagine trying to book a trip to the south of France, but instead of selecting a destination, you are asked how many miles you want to fly. Without precise knowledge, you could end up far from where you need to be.
“Insurance works similarly – if a business does not know the accurate rebuild cost, they could be left significantly short when they need cover the most.”
He said brokers need to play a bigger role here and push clients to have a professional valuation done for their property before setting the sum insured for their insurance policy.
This is in many ways a backhanded compliment to the broking fraternity.
Broking challenges
I am sure there will be many brokers reading Thomson’s comments that will be bristling due to the implication that they simply say to their clients “come up with a number”.
Read: Insurers going that little extranet to tackle rising underinsurance
Read: SME underinsurance is far from a small problem
Explore more commercial lines content here, or discover more news analysis here
It is far more likely that brokers are continuing to have very uncomfortable conversations with their clients about sums insured, who are simply pushing to spend as little as possible on their cover in the hope of using the sums saved elsewhere.
Brokers are then left with the painful choice of having to point out the significant downsides that the insistence not to look to increase the value of the property cover would deliver in the event of a claim.
Brokers are also cognisant of the fact that, at the end of the day, they cannot force the policyholder to change their policy values and if they push too hard, clients may seek solutions elsewhere.
Insurers state that they are putting systems in place which will flag values which they believe do not match the property to be covered and will ask the prospective policyholder if they want to amend the figures.
Underinsurance is a difficult problem, but given the industry’s ability to be portrayed as the villain when policyholders’ expectations are not met, you have to hope that the warnings and advice are fully documented at time of placement to avoid possible errors and omissions issues.
No comments yet