Insurance valuation specialist, Charterfields, says traditional approaches to updating declared values, including the use of the Consumer Price Index, are out of sync with how prices have changed for many assets.
Its own analysis of commercial locations assessed over the last four years suggests that as many as 88% of them were underinsured – with 35% of those undervalued by at least 50%. During 2022, 82% of the commercial locations assessed were considered to be underinsured – with 33% of those undervalued by 50% or more.
The company says it has been inundated with enquiries across the whole insurance value chain as insurers, brokers, risk advisors and policyholders look to reassess reinstatement costs.
Director Andrew Slevin commented: “Our analysis reveals that headline CPI inflation figures are not correlating with how construction and equipment costs are changing. For example, while CPI was up 11.1% for the 12 months to October 2022, in reality, construction costs rose by 15.5% in the same period, with costs varying depending on the type of building, construction and location.
“Underinsurance isn’t a new phenomenon, but the large global increases in materials, labour and energy costs, as well as ongoing supply chain issues mean the problem is getting to near crisis point. We’re seeing commercial construction rates escalate even within the annual policy cycle, and the market has started to take notice."
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