Buildings insurance complaints highlight need for reliable data

Buildings insurance was the seventh most complained about financial product or service in the second quarter of the financial year (July to September), according to the latest data published by the Financial Ombudsman Service (FOS).

The service received 1,757 complaints, of which 41% were upheld. This is a 12% increase on the number of complaints received in the same quarter last year.

A common cause for complaints related to building insurance policies is underinsurance, where the consumer does not receive their claim in full because the reinstatement valuation provided is too low.

In these instances, when the ombudsman investigates a complaint, they look at the information that was provided by both the insurer and the insured, and where the rebuild cost estimate came from.

Cos Kamasho, BCIS Asset Data Manager, said: ‘There are lots of reasons a reinstatement valuation could be too low, from something as simple as the property owner incorrectly using the market valuation, to a multi-billion pound commercial portfolio not being assessed regularly or thoroughly enough to have an up-to-date and reliable figure.

‘The policyholder has a responsibility to supply the right figure and there’s an onus on insurers and brokers to ensure they’ve done everything they can to provide adequate cover. Where that process breaks down, complaints inevitably end up with the Financial Ombudsman.’

FOS has increased its claim limits, to £430,000 for complaints referred to it on or after 1 April 2024 about acts or omissions by firms on or after 1 April 2019.

Movement in BCIS rebuilding cost data shows just how volatile construction has been over the past few years, and how important it is for rebuild estimates to be based on reliable, up-to-date data.

Growth in the ABI/BCIS House Rebuilding Cost Index, which is used to update the BCIS ProtX service and by insurance companies to update cover through the duration of an annual policy, peaked at 19.4% in December 2022, driven particularly by soaring materials cost inflation and the additional cost of adhering to updated building regulations.

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While materials cost inflation has cooled considerably, prices in many housebuilding trades remain high, and are still rising, albeit at a slower pace. Continued conflict in eastern Europe and the Middle East also presents an ongoing inflationary risk.

Kamasho said: ‘Although we’re not seeing rampant inflation anymore, there is still external pressure on costs. Annual growth in the BCIS Labour Cost Index, which tracks movement in trade wage agreements, for example, was at 6% in 3Q2024, and there are widely reported skills shortages in the industry.

‘The full Future Homes and Building Standards set to come into effect in 2025 are also expected to greatly impact rebuild values as properties will have to be rebuilt to the new enhanced standards, not what was in place when the property was first built.’

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