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Why buildings sums insured should be 82% higher

Writer: Ewan SandisonEwan Sandison

With inflation driving a significant widening of the underinsurance gap, in this article we highlight the urgent need for brokers and insurers to reassess building sums insured.

Gray umbrella shelters a small house with a red roof. Green arrow points upward. Blue background with "RebuildCostASSESSMENT.com" text.

The insurance industry is no stranger to the issue of underinsurance. Brokers, insurers and risk managers have long been aware that most UK properties are not insured for their true rebuilding costs. However, while the principle of underinsurance is well understood, the scale of the problem today may still not be fully appreciated.


Our latest analysis suggests that aligning sums insured on buildings with real-world rebuilding costs since the beginning of 2022 would have required an increase of 68% to 82% over the past three years. That’s not a marginal adjustment, it’s a fundamental recalibration of the risk landscape.


Where we started: Underinsurance in 2022

At the start of 2022, our data told us 80% of UK buildings were underinsured, with sums insured averaging just 68% of their correct rebuilding cost. Meanwhile, 14% were overinsured, with sums insured at 126% of correct values. These figures were concerning at the time, but what’s even more important is how they have been impacted by inflation since then.


The inflation impact: A game changer

Between January 2022 and today, construction and materials costs in the UK have risen by between 25% and 35% cumulatively. This means properties that were already underinsured in 2022 are now even more significantly undervalued. Without proactive adjustments, the industry has been facing an unprecedented widening of the underinsurance gap.


When we apply this inflation to the 2022 figures, we see that:


  • Buildings that were covered for just 68% of their correct sum insured now require an increase of approximately 85% to 98% to reach their true insured value.

  • Properties that were overinsured at 126% in 2022 have also been impacted by inflation, but their required reduction is far smaller.

  • The overall weighted average increase needed across all policies is between 68% and 82%.


What this means for the industry

These figures should serve as a wake-up call. The insurance industry has always recognised underinsurance as a challenge, but the scale of correction now required is likely beyond what many had anticipated. This isn’t about gradual annual indexation adjustments – this is a structural market-wide issue that demands attention.


For brokers, this presents both a challenge and an opportunity. Clients who have been reluctant to adjust sums insured in the past may be shocked by the extent of necessary corrections. Educating policyholders on these realities, backed by hard data, will be key to securing the right level of cover and avoiding difficult conversations at the point of claim.


For insurers, these figures highlight the potential exposure within existing books of business. The risk of underinsurance leading to significant claim shortfalls, disputes and reputational damage is increasing. Proactive engagement – through rebuild cost assessments, targeted communications and clearer policyholder guidance – will be critical.


Time to reassess, before it’s too late

The numbers speak for themselves. UK property insurance needs a strategy for realignment to ensure sums insured accurately reflect today’s cost realities. Political and economic uncertainty suggests inflation is likely to continue driving construction costs ever higher. The longer these corrections are delayed, the worse the problem will become.


This isn’t just about ensuring the industry’s profitability or managing claims exposure – it’s about protecting clients from financial disaster. And that, ultimately, is the fundamental purpose of insurance.


Now is the time to act.


This article was originally posted on Insurance Post in partnership with RebuildCostASSESSMENT.com.

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