New findings from Aviva’s latest Broker Barometer suggest that underinsurance continues to pose a material concern for insurance professionals, with the majority of brokers observing significant gaps between declared and actual asset values.
According to the survey, 68% of brokers believe their clients are underinsured. Only 28% of those clients are said to consistently use surveys to assess the value of insured assets. Another 59% use surveys intermittently, while 12% rarely or never rely on one. This approach, brokers say, increases the likelihood of claim disputes or partial settlements.
Aviva, in collaboration with reinstatement cost specialist BCH, analysed valuations for 85 commercial buildings before and after professional surveys.
The research revealed an average underinsurance rate of 73%, equating to a £399,667 shortfall per property. Individual gaps ranged from £50,600 to £1.7 million.
Cost remains the dominant factor in policy decisions, cited by 47% of brokers as the top driver for clients, followed by customer service (40%) and coverage options (38%). Brokers attribute underinsurance primarily to a limited understanding of what constitutes adequate coverage, with 53% identifying this as the main issue.
The implications are visible in claims experience. Seventy-one per cent (71%) of brokers reported an increase in claims being declined or paid out at lower values due to inadequate sums insured. These outcomes have led to financial pressure for 54% of affected clients, and a breakdown in confidence in insurers for 46%.
Four in five brokers agree that underinsurance should be addressed more directly in client conversations. When asked how to approach the issue, half said better broker-client communication would help, and 45% pointed to the need for valuation support tools.
To support detection efforts, Aviva has updated its Commercial Intelligence Tool to flag indicators of underinsurance. These include instances where business interruption indemnity periods appear too short or revenue projections do not align with cover levels. The system delivers this data to underwriters at quote stage, facilitating earlier conversations with brokers.
According to Jason Chambers, director of innovation for SME at Aviva, while cost concerns are common, clients often lack awareness of the consequences of underinsurance. He said that the insurer’s updated tools allow for quicker identification of risk exposures and more informed decision-making by brokers and underwriters.
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