Zoe Davenport, Appraiser for BCH and leaseholder, writes with a unique perspective on the issue of premiums and insurance valuations.
This year, 70% of the Service Charge Budget for my flat is allocated to pay insurance premiums. This is the highest I’ve seen it and unsurprisingly, the response from my neighbours was less than positive. I’m fortunate to see flat block insurance from both sides, and would argue that though these costs are increasing, insurance will remain one of the best ‘investments’ we make, should we need it.
It’s a fact of life, claims happen.
That’s the very reason we have insurance. In the last year, at my block of flats the property manager has submitted two insurance claims on behalf of the leaseholders. A mains water pipe burst, flooding a lower ground floor car park and 4 lift pits. More recently, during storm Eunice, some roof slates were relocated from the mansard roof to the pavement 5 storeys below. Thankfully nobody was hurt.
When the loss adjuster attended the development in both of these instances, we were found to be accurately insured. The claims were actioned with little disruption or impact to us all.
Had we not been insured for the right value, the financial implication of a short fall in the claim pay-out could have been significant.
The factors at play in the insurance market currently are well publicised, and certainly worth reading up on. Our insurance hard market article focuses on the factors that are undoubtedly leading to higher insurance premiums and a tougher stance on claims.
Unfortunately, a hardening of insurance rates has coincided with what some are calling hyperinflation, in buildings costs. Specifically from a building insurance perspective, the situation has been compounded by many factors as outlined in our article on the impact of rising building costs on insurance. This in itself has added to the cost of claims, creating further inflationary impact on insurance premiums, particularly if prudent property owners are making sure their insurance values are adjusted to reflect rising costs.
An RICS compliant Reinstatement Cost Assessment (RCA) remains the most accurate way to value a building for insurance purposes. With the volatility of building cost inflation, it has never been more important to ensure the adequacy of buildings sum insured. Furthermore, it’s never been more important to regularly review this sum insured and BCH are making it easier than ever to do so. In recent years it has been normal to use the level of indexation suggested by insurers at annual review.
The RICS themselves recommend that once an RCA is carried out and a buildings sum insured is set, this figure is subject to a major review three years after the initial RCA. Provided there have been no significant material changes to the development, we will review all of the information collated from our initial site visit (the measured areas, building pathology, influencing site factors) and use our live market data to correctly re-calculate the sum insured. As this is done remotely and does not require a visit to site, we are able to issue these Major Reviews promptly. Furthermore, we are committed to making this RICS compliant product a high value, low cost solution to our customers. As such, a Major Review of our original RCA report is charged at just £99+VAT.
In 2021, in a significant sample of our attended RCAs of flats and mixed use developments, we found under insurance in 66% of cases. Under insurance remains prevalent, and though there are implications of increased insurance premiums, we’re really proud of our contribution to reducing under insurance. If you would like to discuss the lifecycle of an RCA with us further, please feel free to email myself directly or call the office today on 01455 293510.
