Almost Half of Commercial Properties Are Underinsured
30th October 2024
Insurance broker and risk management company Gallagher estimates that almost half (46%) of commercial properties in the UK are underinsured, leaving countless businesses at risk of out-of-pocket costs. The average insurance shortfall is approximately 40%. Such a deficit could leave businesses having to cover a significant portion of the costs to repair or rebuild their commercial properties in the event of a loss. Underinsurance increases financial risk and could lead to lengthier business interruptions.
Factors Impacting Underinsurance
Gallagher’s research, which surveyed claims managers, found that several factors influence the current underinsurance prevalence. Half (50%) of claims managers blame increased labour costs, and 6 in 10 (63%) blame the rising cost of materials. In fact, the cost of building materials has increased by 38% since 2020, according to data from the government’s Department for Business and Trade. Supply chain disruptions and worker shortages have compounded these two issues. Additionally, more than a third (37%) of claims managers reported that property owners don’t conduct regular property valuations, exacerbating the problem.
According to Gallagher’s claims director, Phil Daly, “[The] data shows how important it is for property owners to work with a risk management specialist when insuring their property, as those who don’t are leaving themselves at significant financial risk. Clearly, our research shows that the issue of underinsurance is not going away and has actually increased over the last five years.”
Strategies to Avoid Underinsurance
In light of Gallagher’s research, businesses should review their insurance policies to ensure they have sufficient cover to defend against disaster and consider the following tips:
· Conduct regular, accurate valuations of your business, property and contents. Consider having a professional assist you in the valuation process.
· Provide the cost of rebuilding your business property to your insurer rather than the market value or the amount you purchased it for.
· Determine an appropriate indemnity period that allows your business sufficient time to recover after a loss event.
· Increase your sum insured to reflect inflation.
· Review your policy wording to ensure you have the broadest cover possible. Update your policy whenever you make business changes.
Contact us today to review your insurance cover and ensure robust protection.