Earlier this summer, inflation in the UK reached a 40-year high of 9.4% and as a result many economists predict the UK to have the highest rate of inflation of the G7 nations for the next two years.
Many factors have caused the rapid rise, from the ongoing energy crisis and war in Ukraine, increased post-pandemic demand, supply chain bottlenecks and labour shortages. These factors plus many more are expanding the risks businesses are facing.
Inflation and underinsurance
Inflation driving costs up means that many businesses’ assets will have a significantly higher value and replacement costs from just a few months ago. This has increased the risks of many being underinsured, whether it be rebuilding premises or replacing stock, if you do not have enough coverage due to rising costs you could be liable for the shortfall.
Gareth Williams, Director at Rushton International comments “property damage claims are where we are coming across underinsurance the most. The Office of National Statistics predicted a 7-8% increase in material prices this year, however by June the average increase was already at 23%. Combined with a shortage of materials internationally and labour in the UK, the risk of being underinsured has never been higher.“
Mitigate the risk
Out-of-date valuations in a volatile market aren’t a risk any business wants to deal with. Given the financial impacts that can follow underinsurance, it is important to address the risk in advance of the insurance renewal date. A more robust and accurate review of the reinstatement values can be required from an onsite survey.
How can we help?
As a regulated RICS firm of Chartered Surveyors, our standard model is to offer an onsite assessment and a further extension of service covering 2 years desktop updates, following which we would recommend a return to site. More about our insurance valuation services can be found here.
To discuss your valuation requirements or for further information, please contact a member of our team on 020 7702 3723 or email enquiry@rushton.co.uk.
