’Our research shows that the issue of underinsurance is not going away,’ says claims director
Nearly half (46%) of commercial properties are underinsured, posing a “significant threat to businesses”, according to research from insurance broker and risk management company Gallagher.
The research, which was published on 24 September 2024, showed that the average shortfall in cover currently sits at around 40%.
Some 37% of claims managers felt the insurance gap was being driven by commercial property owners not carrying out regular valuations of their premises.
The Royal Institution of Chartered Surveyors (RICS) recommends that a full reinstatement cost assessment is undertaken every three years, as well as when significant changes, such as an extension, are made to a building.
In addition to property valuations being missed, claims managers cited the rising cost of materials (63%) and increased labour costs (50%) as contributing factors to underinsurance.
And over half (62%) said the issue had got progressively worse over the last five years, leading to difficult conversations with underinsured property owners.
Gallagher claims director Phil Daly said: ”Clearly, our research shows that the issue of underinsurance is not going away and has actually increased over the last five years.
“This poses a significant threat to businesses who may find themselves having to foot some of the costs of rebuilding or repairing their premises.”
BI impact
In the event of damage, 96% of claims managers interviewed said property rebuild and repair times had also increased over the last five years.
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As a result, 54% of claims managers said business interruption (BI) cover was not always adequate.
Daly said: “Challenges, such as supply chain disruption and increased demand for materials, means that owners could face longer repair times, which carries a serious risk of BI.”
To avoid loss, Daly said it was “crucial” that commercial property owners “take appropriate measures”.
“This data shows how important it is for property owners to work with a risk management specialist when insuring their property,” he added.
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