Mark Briggs

Risky business: don’t risk underinsurance in a tough market

3rd December 202115th December 2023 Mark Briggs

Mark Briggs discusses Benchmark, the cost effective e-valuation service from insurance valuation specialists BCH that ensures your buildings insurance cover is set at the right level.

Damage to property is a fact of life. During the pandemic, fires, floods and water damage may not have made the headlines while we have all had other, more pressing problems to deal with, but they have still cost businesses thousands of pounds to put right. These emergencies are still the most common cause of major loss – and they haven’t gone away just because our thoughts have been elsewhere.

The other issue that has not gone away is that, despite the best efforts of brokers to highlight the problem, well over 80% of all property we see is still underinsured. So now, more than ever, it is important for anyone responsible for securing buildings insurance to make sure their policies are regularly reviewed to ensure cover is adequate. Not many of us are in a position to fund any shortfalls in insurance pay outs that could result from underinsurance.

Here at BCH, the launch of our Benchmark E-valuation service in early 2020 was an immediate solution to the fast changing situation brought by the pandemic last year by offering our customers desk-based advice on property insurance values when we were unable to carry out in-person valuations.

Before the pandemic, we had been working for some time on an e-valuation service. Our soft launch during 2020 and the positive response from customers has driven our decision to extend this service more formally in 2021. Branded as Benchmark, the BCH e-valuation service aims to meet demand in the market for a more cost effective, quick-yet-still-accurate service to verify building insurance values, without the need for a site visit.

“Being able to offer the BCH service to clients is a great benefit to both our customers and us. When quoting for a nurseries’ insurance we are often able to comment on whether we think their sum insured is too low based on our knowledge of the sector and other comparable nursery settings. With buildings, it’s different and needs an expert. We are delighted to be able to recommend the services of BCH to our clients.”
Melanie Smith, Marketing Manager, Stanmore Insurance Brokers

Our service has proved instantly popular with all parties to the insurance contract; insurers, brokers and intermediaries and, of course, property-owners. Benchmark will never replace a fully RICS compliant, site-based reinstatement cost assessment (RCA). But, for smaller, simpler commercial risks and blocks of flats up to £5m and for residential houses up to £2million, it is an alternative which should help customers ensure their property insurance values are set at acceptable levels.

The launch of Benchmark has coincided with a tougher stance being taken by insurers on underinsurance, which is generally only discovered when a claim is made. Loss adjusters and brokers have reported that cases of application of Average (which means claims are reduced related to the level of underinsurance), are increasing. At BCH we are now being instructed by insurers to check the adequacy of insurance values after losses to assist them in considering reducing claims pay-outs. We are also asked by policyholders to challenge the values being used by insurers to reduce claims after loss. Sadly, this is often a desperate attempt to reduce the impact of underinsurance and rarely helps.

Policyholders continually need reminding pre-renewal that the responsibility for setting insurance values ultimately rests with them. Should the values submitted to their insurer be found to be lacking at the time of claim, there are consequences. These are laid out in their insurance contracts and the value of their claim is likely to be affected. What will follow is at best disappointment and, in the worst case scenario, leaseholders and business owners could be looking at financial ruin.

“Not only does our comprehensive Benchmark service utilise the Building Cost Information Service (BCIS) and our database of over 50,000 site-based surveys, we are also introducing a new data source – SPONs, it provides the most accurate, detailed and professionally relevant construction price information for the UK. All our Benchmarks are carried out by surveyors who continue to complete site-based Reinstatement Cost Assessments.
Our desk-based e-valuation is quicker from instruction to report; considering this and the limit on liability, Benchmark’s fee is lower than a traditional, fully compliant site-based RCA but not suitable for all buildings.
With the substantial uptake and growth since our soft release in early 2020 we are setting ourselves up for an exciting 2022.”
Lee Bond, Benchmark Principal Surveyor

Even for Insurers, times are hard and the current market conditions and prospects, are about as tough as they get. The attitude to underinsurance at the time of claim is getting tougher. Adequate insurance levels should ensure that policyholders making claims don’t end up victims twice….suffering a loss and then having their pay-out reduced.

You can call us on 01455 293510, email info@bch.uk.com or order a benchmark directly on our website.

If you are a broker, insurer or managing agent, you may benefit from our Portal which through a log-in, enables you to request, manage and track the status of multiple RCAs and Benchmarks for your customers – ask us for more information!

Insurance Rebuilding Costs in a Post COVID-19 Britain

9th June 20204th February 2022 Mark Briggs

Mark Briggs considers what might happen to rebuilding costs when normality returns to the building industry.

Mark Briggs, Commercial Director of Barrett Corp and Harrington (BCH) considers what might happen to rebuilding costs when normality (whatever that may look like) returns to the building industry. He also revisits the difference between the declared value and sum insured, a question often raised at the time of a reinstatement cost assessment and explains how the right policy choice will help accommodate any volatility in insurance rebuild values, associated with potential inflation.

At the time of writing, following HM Government Guidelines, as we at BCH are unable to carry out fully complaint site-based reinstatement cost assessments (RCAs) from home, our appraisers are out there again working as safely as possible to deliver a great service. Many building sites are working too. The crisis has shown that we can run a business from people’s homes, but it is fair to say that we are missing the face to face human contact and conversations over a flat white!

The impact of a recession on construction costs.

Across the country, buildings still being damaged by fire, flood, impact and storms. Insurance claims are still being made and settled by Insurers. Contractors are out there ready to repair or rebuild following a loss. However, as Britain emerges from what is now officially a recession, what impact will there be on construction costs and how should we reflect that in our recommendation on reinstatement costs for insurance purposes?

A recession normally leads to prices of materials and labour falling as supply exceeds falling demand. In early 2020 there were inflationary pressures on building costs as the country pondered a post-Brexit Britain.

building-materials — Price of materials and labour falling as supply exceeds falling demand.

Even the BCIS (Building Cost Information Service, part of RICS) was suggesting a range of predictions on what might happen but all in the medium term were inflationary. Factors such as labour shortages and higher prices for imported materials were likely to have had an effect as confidence led to more construction activity.

Inflation could soon bounce back.

Then came COVID19 and nearly everything stopped. If we pull out of this quickly, inflation could soon bounce back. Prices of some construction materials are already increasing as demand, small as it is, outstrips supply, decimated by the closure of manufacturing facilities.

So how do property owners and all the parties responsible for ensuring the adequacy of insurance values, protect themselves from being underinsured if inflation takes off rendering their insurance values inadequate at the time of loss?

A solution.

day one reinstatement insurance policy — Day One Reinstatement policies form the basis of most insurance policies for commercial property including flats.

Day One Reinstatement policies form the basis of most insurance policies for commercial property including flats.

Not surprisingly, insurers have a solution. This isn’t the first time in history that predicting the impact of inflation has posed a problem.

Forty-plus years ago, annual inflation rates were volatile with rates in double-digit figures. Allowing an inflation contingency over and above the base cost of rebuilding estimates was almost impossible. The solution was Day One Reinstatement policies which now form the basis of most flats policies in the market.

Basically, the insurer asks the policyholder to accurately state the cost of rebuilding the entire premises as if it was destroyed on the first day of the policy, thus, the need to predict inflation is removed by choosing a generous inflation uplift, commonly,15% up to 50%. This uplift is for inflation only and it is imperative that the Day One value referred to as the Declared Value is correct.

Simply speaking, if the declared value is wrong (and this is only likely to come to light at the time of loss) then policies are likely to have penalties to reflect underinsurance built into the wording.

It makes sense to review the insurance every three years.

The normal wording states that a reduction will be made at the time of claim, proportionate to the amount the declared value was compared to the true rebuilding cost, at the beginning or ‘day one’ of the policy. In insurance jargon, this is called ‘Average’. The last thing flat owners want to find out at the time of major loss is that they are underinsured and that this will reduce the payout on their perfectly valid insurance claim.

Whilst BCH does not advise on the choice of specific policies or wordings (that is the Broker’s job) it makes sense to ensure that the insurance value on the policy is reviewed at least every three years- ideally at some point with a full reinstatement cost assessment being undertaken. Also, in uncertain times, the potential impact of inflation on the base value is considered and incorporated in the insurance figure stated in the policy. The Day One Policy makes life easier.

Check your policy has got appropriate inflation provision.

Checking insurance policy — Accurate insurance rebuilding cost assessments, coupled with appropriate inflation provision, will be critical to safeguarding your property.

Take a look at your policy schedule: if it has two figures on it then the lower one will be the important Declared Value which has to be right at the outset.

The higher one is the Sum Insured which if you divide by the lower will show you the amount of the inflation uplift allowed if this is not stated in the schedule. The uplift is only for inflation.

If building cost inflation is low at say 2% p.a then a 50% uplift appears excessive, but that is intended to cover inflation over the policy year and for the period of any reconstruction post-loss.

But if inflation should come back with a vengeance in a post-COVID and post Brexit Britain then we might – just might start seeing double-digit annual inflation in which case the importance of correct insurance rebuilding cost assessments, coupled with appropriate inflation provision, will be critical.

Want to know more?

BCH is one of the largest suppliers of RCAs to the UK insurance market. It offers a full site-based, RICS compliant assessment with prices starting from £365 plus VAT.

Please feel free to call us today on 01455 293510 or contact via email, the BCH office team will be happy to answer your query.

Stepping into the past at the Black Country Living Museum

10th July 201913th December 2019 Mark Briggs

The Black Country Living Museum is unique in every respect. There are approximately 100 buildings of a variety of ages on the site, as well as external structures including a lime kiln, canal basin and bridges…

Q: Why did you choose this building?

The site has been sympathetically put together and really does feel like you’re walking back through time- which is one of the reasons it made such a good set for some of the recording of Peaky Blinders!

Q: What would be the key concerns about rebuilding here?

With many of the buildings being original and relocated here from other parts of the country, a challenge of reinstating at the Black Country Living Museum would be ensuring the buildings are reflective of their era, so the materials and even in some cases traditional construction methods no longer used in modern methods of construction, would be required.

A good example of this would be Jerushah (Tilted Cottage), a cottage believed to have been built around 1847. It was relocated from Gornalwood, Dudley in the 1980s and was subsiding as coal from the Earl of Dudley’s mines was dug from underneath the area.

As such, the Black Country Living Museum underwent a highly detailed reconstruction of the property, with the tilt being retained. This rebuild is believed to have taken 3 years, ensuring that the structure we see today is true to how the building stood in its original location.

bch-tilted-cottage — Jerushah (Tilted Cottage), a cottage believed to have been built around 1847.

Q: Interesting fact about this building?

The site of the Black Country Living Museum was formally a mining site, with 50 mine pits believed to have been in use. Though these have all been decommissioned, there is a replica mine that gives a very realistic experience of mining conditions.

Q: If you could survey and assess any building in the world, which would you choose?

The Silverstone Wing. With 40 pit garages beneath the spectator and hospitality zones, media centre and control tower, it would be a long but interesting ‘day at the office’!

Q: What do you do when you are not working?

My new role as Director at BCH is certainly taking up a lot of time as I enjoy being available to respond to queries and travelling nationally to fulfil the role, but in addition to this, my downtime is largely spent on walks with my wife, daughter and two spaniels.