Two-thirds of commercial properties in the UK are underinsured, with the average gap between sums insured and estimated rebuild costs standing at 79%, according to new research from Aviva.
The findings, drawn from a review of commercial property covers written in 2025, form part of Aviva’s annual Broker Barometer report, which surveyed brokers across the industry on the state of commercial insurance. The data indicates that underinsurance has moved beyond a background concern and is now affecting claim outcomes.
Brokers reported that 68% have seen an industry-wide rise in claims being declined or settled for less due to underinsurance. The impact on policyholders extends beyond financial strain: 56% of affected clients experience financial pressure, and 37% face operational disruption from inadequate business interruption cover. More severe consequences include business closure (26%) and job losses (20%), while 21% of brokers noted lasting effects on clients’ mental health.
While cost has long been cited as the main driver of underinsurance, perceptions are shifting. Last year, 47% of brokers identified price as the primary factor; this has since fallen to 29%. Lack of awareness now tops the list (40%), followed by misunderstanding the impact of inflation (33%) and policy terms (32%). A belief that a major loss “won’t happen to us” was cited by 30% of respondents.
Jason Chambers, director of innovation, commercial lines at Aviva, described the findings as indicative of a structural issue in how cover is managed over time.
“Underinsurance is no longer just an oversight – it’s becoming an embedded behaviour,” Chambers said. “At today’s rate of index-only correction of around 4.4%, simply relying on incremental renewal increases can leave customers materially underinsured for 15 to 25 years.”
He added: “We see the paradox clearly: many customers review their cover every year, yet their sums insured continue to fall short of what’s needed.”
Brokers appear ready to act. The report found that 82% plan to use the current soft market - marked by greater pricing flexibility - to help clients address underinsurance gaps. This represents a shift in broker approach, with 87% now saying they should proactively tackle the issue, up from 80% the previous year.
Engagement remains inconsistent, however: only 24% of brokers discuss sums insured with clients regularly, while 60% do so sometimes and 14% rarely. Reinstatement cost assessments are similarly underused; just 24% of businesses regularly commission surveys to determine property valuations, with 14% doing so rarely or never.
The Aviva findings come amid sustained construction cost pressure. According to the Building Cost Information Service (BCIS), reinstatement costs rose 3.8% in the year to January 2025, with labour identified as the primary driver – outpacing the wider economy and compounded by increases to employers’ National Insurance contributions and the National Living Wage.
Separate data from RebuildCostASSESSMENT.com reinforces the scale of the problem. As of September 2025, only 7% of UK properties were correctly insured, with the average underinsured property covered for just 67% of its actual rebuild cost – up slightly from 63% the previous year.
Certain sectors face particularly acute exposure. Care homes show the highest levels of underinsurance, at 85% below rebuild cost, while listed buildings and properties with recent extensions or sustainability upgrades also present elevated risk.
Looking ahead, insurers are expected to continue scrutinising declared values and applying average clauses at the claims stage, with mid-term risk reviews becoming increasingly common.
