Under insurance is a perennial problem that has never ever really been off the radar for insurance brokers and insurers. Not having the correct rebuild value for buildings, plant and machinery is an obvious threat to business in the event of a major loss.
We have written a lot about Underinsurance and why it poses a threat to businesses and, indeed, personally to directors of businesses if they don’t get this right.
But just why does underinsurance continue to pose such a threat to businesses and what can firms do to overcome the problem?
Rebuild costs can and do vary significantly from one year to the next. Right now, we are seeing the pitfalls of this approach as rebuild costs are being impacted by:
- Costs of labour
- Costs of materials – steel, wood, concrete, and bricks for example
- Rules of reinstatement
- Availability of materials and labour
- Building standards regulation
- The effects of Brexit
- Global shipping difficulties
- War in Ukraine
- Energy costs (which continue to be relevant).
Sedgwick’s property and loss adjusting team offers global expertise in property insurance claims and solutions for commercial and residential markets. The Sedgwick Building Index is a benchmark for what is happening to building costs.
Far too many businesses think hard enough about increasing or decreasing the sum insured for rebuild and rely on insurers index-linking it to inflation. Due to building material price increases and building cost inflation due to the factors above, we are beginning to see insurers uplifting the indexation they are using on property insurance. Note that the premium will also increase each year, to reflect the increase in policy benefit and the sums insured.
Expect Your Insurer to be Uplifting Sums Insured at Renewal by a Minimum of 15%
Talk to an expert – Anthony Jones can help customers with insurance valuations for all types of commercial buildings, providing accurate reinstatement cost assessments via our chosen third-party suppliers. Most require an on-site inspection to accurately take note of the building materials, measurements and evaluate specifics.
A Reinstatement Cost Analysis (RCA) is the basis adopted by the Royal Institution of Chartered Surveyors (RICS) for undertaking an assessment of commercial property for insurance purposes. We can also offer a desk-based service for commercial properties with a Declared Value up to £5M.
Be mindful of cost inflation. There is no point buying insurance protection that isn’t fit for purpose.