07 Apr The Hidden Impact of Rising Building Costs
In recent years, building costs have increased significantly, driven by supply chain pressures, labour shortages, and sustained demand across the construction sector.
While this is widely reported, what is less obvious is how these increases can quietly impact your insurance cover.
For many businesses and property owners, insurance programs are reviewed and renewed each year. However, a renewal does not always mean that the underlying insured values have kept pace with current rebuilding costs.
This can result in a property being unintentionally underinsured because insured values haven’t been revisited in line with current building costs.
Why This Matters More Than It Appears
In the event of an insurance claim, this gap can become important. Depending on the policy structure, underinsurance can affect how claims are assessed and, in some cases, the amount ultimately recoverable — which may not align with expectations at the time of a loss.
What makes this particularly challenging is that the issue often isn’t visible day to day. Cover may appear adequate on paper, and renewal processes can reinforce a sense that everything is in order.
It is typically only when a loss occurs, or when values are reviewed in detail, that any discrepancy becomes clear.
A Changing Environment
We are also seeing insurers take a closer look at declared values, particularly for larger or more complex risks. In some cases, this includes more detailed questioning or requests for supporting information around how values have been determined.
This reflects a broader shift in the market, where accuracy of declared values is becoming increasingly important, not only for underwriting but also for how claims are ultimately assessed.
Renewal can give a false sense of review — particularly
where underlying values haven’t been revisited in line with current building costs.
What to Consider
For property owners and businesses, this doesn’t necessarily mean drastic change, but it does raise a few practical considerations:
- When were your building or asset values last reviewed in detail?
- Have those values kept pace with current construction costs?
- Would your current cover reflect a full rebuild in today’s market conditions?
These are not always straightforward questions, but they are increasingly relevant in the current environment.
A Practical Approach
Taking the time to sense-check insured values — even outside of the renewal cycle — can help ensure that your insurance program reflects current market conditions, rather than assumptions from prior years.
In many cases, this is less about making immediate changes, and more about ensuring that the foundations of your cover remain aligned with the realities of the market.
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