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With 84% of commercial buildings and an estimated 90% of houses of ‘significant’ value reportedly under-insured, or insured for the wrong amount*, and with the insurance market looking set to redress the most significant losses in over a decade, now would be a good time to reassess your property insurance cover.
The insurance market is facing considerable challenges, experiencing significant losses in 2022 primarily as a result of more commonplace extreme weather events, the implementation of the FCA’s pricing reforms and high inflation. With losses looking set to continue into 2023, Ernst and Young are predicting that insurance premiums could rise by up to 30% in 2023. Underwriters are also looking at claims more closely and instructing loss adjusters to check whether affected properties are fully valued.
Although Storm Otto, mercifully, did far less damage than Storm Arwen, it has served as a timely reminder to make sure that building insurance cover is both up to date and at an appropriate level to mitigate rising premiums and ensure you are fully covered if the worst were to happen.
To do so, I suggest that the following key questions are asked:
Normally, the amount of cover is increased in line with standard approved indices each year. This is fine, but it can provide a false sense of security – particularly if this has not been checked for some years. Ongoing monitoring of construction costs can be key to ensuring your cover is at the appropriate level. We reviewed a large estate’s cover recently and recommended that the client increased their cover by 75%.
It is also worth considering whether traditional farm buildings, for example, really do have development potential and, if not, it may be better to cap the insurance cover to the cost of a modern replacement building.
It may be that there are some assets whose cover could be capped on a 1st loss basis to help reduce the premium. Or the current policy excess – the amount you pay before cover starts – may be low and could be increased to achieve further premium reductions.
Finally, consideration could also be given to getting tenders from the market to ensure that you are getting the best value.
*Data from RebuildCostASSESSMENT.com which provides the insurance industry with data on the accuracy of building sums insured in the UK each year.