Many household policyholders are underinsured and brokers will get the blame if claims are not met in full. Paul Quastel explains the benefits of valuation

Clients get very annoyed when they make a claim and don't get paid in full. The situation becomes a nightmare for all parties and invariably the client walks away a very unhappy bunny. They tend to blame their broker. Are they justified? To a degree, yes.

I'm prepared to bet heavily that about 90% of your clients currently without a household valuation are underinsured, and when they have one, the vast majority will find they are underinsured by at least 60% and some by as much as 500%.

As it stands, this situation is surely bad news for you. Not only are you missing out on a huge amount of uncollected premium income, but if the worst happens, your clients will be unhappy, the industry will be even further despised, and you will doubtless lose the business.

Here are four common underinsurance situations:

  • Index linking is a favourite. Any clients with antiques, fine art or jewellery will be undervalued after five years, yet most clients never think to reassess their figures for at least ten years. Why not ask them if they would like a review?

  • Acquisitions slip by unnoticed. People inherit, purchase and upgrade, especially in the middle years when older family members pass away, and incomes and family size increase. You could suggest a valuation to make sure their insurance keeps pace - this is especially relevant for inherited items as the recipients tend to rely on probate values.

  • Reliance on previous figures. If your client's circumstances alter, or they change insurance broker, they may not think to reassess their insurance needs. The figures they give you may be based on previous bad judgment or advice. If you can't visit the client yourself, ask if they would like the reassurance of a professional appraisal of their house contents.

  • Misunderstanding. You work in the industry so you know about insurance. Clients don't. Most people think that what they need to insure is only what they might have stolen or destroyed, that is what they consider valuable.

    They do not understand that "contents insurance" means the whole contents. Nor do they understand that they must supply the replacement value. Many clients react with shock when we value an old sofa at £1,200, saying: "But I'd only get £100 for it if I sold it tomorrow."

    This is a very good illustration of how things can start on the wrong footing. Walking round the house with a professional valuer who can advise on retail replacement costs and talk knowledgeably about their precious possessions gives clients a clearer insight into the situation.

    Human nature being what it is, clients will always complain about premiums. But despite the perceived cost, most would not want to be deliberately underinsured.

    Equally we know there are ways of keeping a premium reasonable - certain items can have agreed values, or be specifically omitted, not to mention that high net worth policies have generous rates for antiques and fine art. Only when you have the correct facts and figures can you decide which policy will fit best.

    Given that many people don't know professional valuers exist, or believe we only visit high net worth homes, it's easy to understand why so many don't use our services, so tell every client and you will be surprised how many show interest.

    So how much does a valuation cost? Perhaps surprisingly, it need cost no more than £235, which is the fee for our wealth-check. This handy service gives you the figures you need to discuss and arrange correct insurance cover, yet involves minimal cost.

    Remember, it's not a question of whether your client can afford a valuation, but whether they can afford to remain ignorant of their true worth.

    And for every increased sum insured, there's not only the additional premium for you, there's the chance to show your client the real meaning of professionalism and integrity. n

  • Paul Quastel is a professional valuer