We estimate there is around a 20-30% rate of underinsurance across the market as a result of inaccurate valuations, but as the market continues to undergo a period of hardening, and in the run up to 1:1 renewals, what other reasons are there to review your declared property values?
1. Supply Chain Risk Management
Covid has created an environment where the supply chains and established ways of working have been fundamentally changed. Construction material suppliers and contractors are reporting huge increases in costs over the last 12-18 months but particularly in 2021. While some of these may be relatively temporary in nature, many of these changes such as labour shortages appear to be more systemic in nature. As a consequence, rolling over previous declared values, or adding on a small increase based on consumer price indices, could leave owners exposed to significant losses.
2. Improve Underwriting Effectiveness
After a period of strong increases, insurers are seeing premium growth start to level off in many areas. We expect that they will look to other ways to improve margins and ratios. This will include a renewed focus on the quality of the data provided during renewals, the reintroduction of average clauses and challenging the validity of declared values in the event of a loss.
3. Credibility
An accurate assessment by a qualified, independent and experienced external valuer gives insurers and reinsurers additional comfort that the renewal process is well managed and the policyholder is keen to disclose all relevant information. This is often reflected in competitive final premiums or terms being offered.
4. Quick and Indicative Assessment
The cost, duration and disruption of carrying out an appraisal of buildings and plant has greatly reduced in recently years and the impact of Covid has accelerated the transition to modelling and analytics. As a result, valuers can more easily provide accurate assessments suitable for insurance placement than previously.
5. Long-term Cost Savings
The current economic environment means that firms are keen to save costs wherever possible. A formal external assessment can help policyholders identify assets that may not need to be insured on the basis of full reinstatement, for example underutilised assets may be excluded or included at an Actual Cash Value amount instead. Moreover, in these days of limited resources and continuing disruption, local management or engineering teams may not have the time to prepare this analysis.