Underinsurance: a case study

Last year we published an article from our claims team that asked if we were doing enough to reduce the frequency of underinsurance because we were seeing disturbing cases of inadequate cover arranged for our customer’s homes and treasured valuables. We have to report continuing cases of severe underinsurance in Private Client insurance schedules.

Some example of such cases are:

We are currently handling a claim for a converted barn being one of several outbuildings surrounding a beautiful country home. Looking in to the insurance position we see our client took advice from surveyors on the market and insurance values of the home, prior to purchase. The main house dating to 1600 was insured for £880,000 as recommended, but the surveyors had not included the converted barn (severely damaged by a fire), two stable blocks, a small single storey annexe, two large ornamental ponds, a swimming pool, pool house, tennis court  a triple garage with a gym attached as well as driveways and boundary walls. We commissioned a revaluation that put the estate at £2,800,000.

Recently, we saw a policy insuring the contents of a substantial home for only £92,540. We had a claim for water damage to an antique Steinway grand piano with a replacement value of £80,000. The customer had no idea the piano was so valuable!

An everyday example provided by one of our claim managers concerns an engagement ring purchased 8 years ago for £5,500. The replacement cost today has been professionally estimated at £13,550 for an equivalent quality gemstone ring. The current index-linked sum insured is £5,637 as the insurance replacement value has not been reviewed since purchase. All of us involved in this process have simply got to be more sceptical, ask more questions and encourage our customers to make enquiries and be sure they are well covered for their principle assets. We must ask them what they have done to get a reliable valuation and see the evidence and signpost customers to art and jewellery valuers, building surveyors and BCIS as necessary.

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