Why now is the time to act – an update from our news article from last year.

As a UK-based insurance broker, we at Munro-Greenhalgh continually emphasise that securing cover is only part of the equation — being adequately covered matters even more. The issue of underinsurance remains a pervasive, often hidden threat for small to medium enterprises (SMEs), commercial property owners and landlords alike. With inflation, rising rebuild/repair costs and business model shifts all playing a role, the exposure is greater than ever.

What the latest data shows

Here are recent findings (within the last 12 months) highlighting the scale of the underinsurance challenge in the UK:

• A 2025 industry report from Charterfields found that 88% of surveyed commercial sites were underinsured on building cover, and 77% on plant, equipment or contents. Charterfields Limited+1
• According to a statistics from Rebuildcostassessment an estimated 70% of UK buildings remain underinsured and on average are only covered for about 67% of their true rebuild cost. https://www.rebuildcostassessment.com/
• The market for SMEs also shows worrying numbers: an estimated up to 80 % of UK small businesses may be underinsured. Insurance Business
• One study found that prior to reassessment, buildings were underinsured by an average of 73 % (equivalent to a shortfall of circa £382,000) in the valuations reviewed. connect.avivab2b.co.uk
• A recent survey of brokers by Aviva revealed that approx. 73 % of brokers believe their clients are underinsured, and only 24 % reported that clients had increased their sums insured to keep pace with inflation. Insurance Business

These figures collectively show that while the message is well-known, the practical gap in adequate cover remains large.

Why the gap persists

Several factors combine to keep underinsurance a significant risk:

• Inflation and cost escalation: Costs for materials, labour and supply chains remain elevated, often out-pacing the sums insured on policies. For example, material cost increases were cited by many claims managers as a major driver.
• Outdated valuations: Many policy-holders, especially in property occupier/owner roles, have sums insured based on historic values rather than current reinstatement cost estimates. Without a fresh RCE (Reinstatement Cost Estimate), the gap widens.
• Policy assumptions and complacency: Some businesses assume insurance policies will automatically ‘scale’ with their asset growth or cost inflation — but this is rarely the case.
• Condition of Average / proportional settlement risk: When a sum insured is significantly lower than true value, insurers may apply a proportionate reduction when settling claims — meaning the shortfall falls on the insured.
• Focus on premium cost over cover adequacy: As one study noted, cost is often the main factor for clients — leading to undersized cover limits.

What this means for your business

For business owners, property occupiers or landlords, here are the key implications:

• If you have insurance, don’t assume you are adequately insured. The risk of an uncovered shortfall is real — especially when valuations haven’t kept pace.
• A major event (fire, flood, equipment failure, business interruption) may trigger a claim whose costs exceed your cover, leaving you exposed to large out-of-pocket costs.
• The softening of some insurance market conditions (in terms of pricing) may create a window of opportunity to review cover while capacity and terms remain favourable.
• Now is the time to act – updating your sums insured, reviewing exposures, and working with a broker to ensure cover reflects current cost, not historic cost.

Practical steps to mitigate underinsurance

Here’s a checklist we recommend:

1. Commission a Reinstatement Cost Estimate (RCE) for your buildings — and review plant, machinery, contents and business interruption exposures.
2. Review your sums insured at least annually, especially after refurbishments, growth in operations, equipment investment or any significant change.
3. Ensure your broker/policy wording addresses your business model — including business interruption period adequacy, contents replacement, asset growth and inflation indexing.
4. Consider index-linking or appropriate inflation protection in your policy to keep pace with cost rises.
5. Educate decision-makers in your business: Underinsurance is often a silent risk until a claim occurs. Proactive planning matters.

How we help

At Munro-Greenhalgh, we specialise in working with UK SMEs, commercial property occupiers and landlords. Our role is to:

• Help you benchmark exposures and valuations against industry norms
• Work with you to ensure your sums insured reflect realistic rebuild/replacement costs
• Explain clearly the implications of underinsurance (with case studies where possible)
• Partner across multiple insurers to secure not just cover, but adequate cover at competitive terms

Final thoughts

Underinsurance isn’t merely an “insurance issue” – it’s a business-continuity issue. Having cover isn’t sufficient if the sums insured are significantly short of the true cost of loss. In today’s environment of heightened cost inflation, supply-chain fragility and evolving risk landscapes, ensuring your cover is accurate and current is essential.

If you haven’t reviewed your cover and sums insured in the past 12 months, now is the right time. Contact us for a no-obligation review — protecting your business today means peace of mind tomorrow.