Almost 16% of home insurance claimants are underinsured

according to Aviva

Aviva urges homeowners to review rebuilding costs amid rising evidence of under-insurance in claims experience

Less than 6% of homeowners have increased their sums insured 

Some 4 in 10 Irish homeowners have received a letter from their insurer warning that the sum insured on their property may be insufficient due to the rising costs of rebuilding a home1. However, of those recipients only 6% reported having increased their sum insured to the correct rebuilding cost.  This is one of the key findings of a survey of 600 homeowners across the country conducted by iReach Insights on behalf of Aviva Insurance Ireland DAC (Aviva).

All home insurance policyholders are due to receive this letter as insurers proactively seek to raise awareness of the risks of being under-insured.

Aviva is urging homeowners to review the rebuilding costs on their home insurance policy as these costs have increased substantially over the last six months. The company warned homeowners that they are at risk of being under-insured in the unfortunate event of a claim.  The insurer said that it is increasingly seeing evidence that the sums insured are inadequate when dealing with customer claims.

The Aviva research found:

  • Most people (6 in 10) have not yet received a letter from their insurer
  • More than 1 in 10 have received the letter and plan to act (14%)
  • Fewer than 1 in 10 don’t plan to act (8%)
  • 16% have already increased the sum insured to varying degrees

Rising inflation and increases in material and building costs have seen the Society of Chartered Surveyors Ireland (SCSI) increase the rebuild rates last September, with significant increases of between 15% to 44% set. This is at complete variance to the previous rate increases published by the SCSI where rates would have increased by 4%-8%. Anyone who has ever had to make a claim on their policy will appreciate that it can be a stressful time and, as insurers, we want to avoid having to add to the stress by telling our customers that they are under-insured.

Billy Shannon, Aviva

We have written to all our home insurance customers encouraging them to review their sums insured so that they have the correct cover in place. However, the response level from customers to date has been low. From a claims’ perspective, we are seeing evidence of under insurance in c. 16% of claims received to date and we expect that this figure will continue to rise unless action is taken. While the increased rates are considerable it does not necessarily mean that premiums will increase by the same amount. We would encourage homeowners to take the time to review their cover and make the necessary adjustment to ensure they are fully covered

Billy Shannon, Aviva

Of those who have received the letter but have yet to act:

  • 1 in 5 people said they simply cannot afford to pay any more – this is a bigger issue for households with children (38%) and those in the 35–44-year age bracket (33%)
  • 2 in 5 say, that based on a policy review, they are satisfied that there sum insured is already sufficient
  • 1/3 of homeowners say it’s on their to do list but that they just haven’t gotten around to it
  • More than 1 in 5 (22%) either don’t know how to calculate the correct amount or are not aware of the financial exposure of being underinsured
  • More men (9%) say they are willing to take a chance that nothing will happen, than their female counterparts (1%)

Customers who are under-insured and who make a claim under their policy may not be fully protected and may not receive the full amount necessary to rebuild or repair their home. For example, if a home is insured for €300,000 and the current rebuild costs of the property is €400,000, meaning that it is underinsured by €100,000 or 25%. If a claim occurs where the damage is estimated to be valued at €100,000 because the property is underinsured by 25% the insured will only receive €75,000.  The homeowner will then have to supplement the shortfall if they wish to restore the property to its original specification

Aviva recommends that customers use the SCSI’s house rebuild calculator that is available on its website to satisfy themselves that they are fully covered. Home insurance customers may increase their cover at any time and do not have to wait for their insurance renewal date to do so.

1. The Society of Chartered Surveyors Ireland (SCSI) updated the rates for rebuilding costs in September 2022, which saw significant price increases ranging from between 15% and 44%.  These new rates are considerably higher than previous rates published by the SCSI (17 months previously) where increases of between 4% and 8% were implemented.

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Aviva Group Services Ireland Limited, a private company limited by shares. Registered in Ireland No.322579. Registered Office: Cherrywood Business Park, Dublin, Ireland, D18 W2P5.