Plea issued to brokers as underinsurance becomes ‘increasing problem’

Underinsurance is becoming an “increasing problem” in the high net worth (HNW) sector as more clients reduce their coverage.

That was according to Ecclesiastical, which has urged brokers to speak to their clients about regular valuations to avoid the problem.

According to figures from the insurer, 25% of people reduced their insurance cover during the past year, representing a 10% increase on the previous year.

Buildings (66%), jewellery (62%), contents (59%), and watches (53%) are the areas where clients are most underinsured.

It comes amid an increase in HNW clients wanting to reduce their insurance costs.

For example, the insurer found that over two thirds (67%) of brokers reported that more of their HNW clients were asking to reduce their premiums than ever before.

A total of 100 telephone interviews with brokers who place business for HNW and private clients were conducted between March and April 2024 for the research.

Sarah Willoughby, art and private client business director at Ecclesiastical, said: “Underinsurance has always been an issue in the HNW sector, however our research suggests this is an increasing problem.”

Broker plea

The top reasons why brokers thought HNW clients were underinsured was out of date valuations (76%), lack of awareness of the value of their property and possessions (74%), lack of awareness of the rise in rebuild and repair costs (71%) and not reviewing and keeping up to date sums insured (70%).

The majority (97%) of brokers said they were taking steps to reduce the risk of underinsurance with their HNW clients, including advising on the risks of underinsurance (41%) and referring clients to a trusted valuer or surveyor (35%).

Despite this, seven in 10 brokers said HNW clients needed more support and guidance to understand the risks of underinsurance, up 1% on the previous year.

Ecclesiastical is now encouraging brokers to speak to people about the importance of having regular valuations, as well as setting and maintaining sums insured at the correct level to avoid the risk of underinsurance.

The insurer said that fast-appreciating items, including jewellery and watches, should be revalued every three years and those with more stable values every five years.

“It’s vital brokers are speaking to their clients to ensure they are keeping valuations up to date,” Willoughby said.

“While HNW clients may have existing valuations, the prices and values of many precious items can increase rapidly and valuations can quickly go out-of-date. Brokers play a vital role in ensuring their clients have the correct cover in place.”