BCIS research reveals industry’s exposure when selling buildings insurance cover
Research by the Building Cost Information Service (BCIS) has exposed how a high proportion of homeowners could be paying the wrong premium for their buildings insurance if they make the common mistake of insuring for market value rather than rebuilding cost.
According to aggregator Confused.com, and previous studies, 30% of people insure their homes for current market value.
The BCIS research shows the impact of insuring at market value rather than rebuilding cost.
For the UK as a whole, 58% of properties would be over-insured, with homeowners paying an average of £140 more premium than necessary and 21% under-insured with an average shortfall in cover of £40,000.
The area at highest risk of over-insurance from the use of market value is London, with homeowners on average, paying £570 more in premiums than necessary.
Conversely, the area at the highest risk of under-insurance from the use of market value is Yorkshire and Humberside where the average shortfall in cover is £72,000. Those that are underinsured run the risk of their claim not being settled in full. This could affect any claim, not just a total loss.
Andrew Thompson, international development and data director at BCIS, said : “The research we have carried out demonstrates the importance of insuring for rebuilding cost rather than market value.
"In the past, the homeowner would need to know the floor area of their property to stand any chance of obtaining a rebuilding cost figure and this is often a stumbling block. Alternatively, homeowners can opt for a bedroom rated buildings policy with capped or unlimited cover but ultimately, they can only be assured of the best deal if they obtain both bedroom rated and sum insured based quotations. The BCIS service allows homeowners to do just that and does not need the floor area of the property to return a rebuilding cost value.
"Aggregators and brokers can be confident that they are offering the best type of policy to the homeowner and in turn, this gives them a competitive edge. We are working with a growing number of insurers, aggregators and brokers to support them in increasing their buildings cover business.”