Landlords are exiting. Others are scaling. What sits underneath is a more fundamental shift: risk in the property market is becoming harder to price, harder to insure, and easier to understand.
“I think quite a few of the so-called ‘incidental landlords’ are probably just questioning whether they want to be in that space at all or not,” said Simon Thomas (pictured), managing director at Protect Commercial Insurance, adding that this “is obviously creating an opportunity for the more professional landlords,” but “with that comes challenges because there is a lot more onus on the landlords now than there ever has been.”
The pressure is not confined to regulation. It is reshaping how landlords assess exposure altogether, from compliance and tenant risk through to how long they may be left without income, with “a whole different level of understanding of the market and tolerances around what they can carry from a financial risk perspective,” Thomas said, pointing to the growing relevance of rent guarantee products as insurers adapt to longer periods of non-payment.
Underinsurance is no longer peripheral, it is systemic, Thomas said, “something as scary as like 60% of properties in the UK, are underinsured at the moment.”
The root cause is often basic but persistent. “People buying properties confuse the purchase price with the rebuild cost,” he said, a gap that has widened as inflation and construction costs have risen, leaving many properties materially underinsured without owners fully realising it.
That creates a difficult balancing act. “We lose a lot of clients on the back of it as well, because if it is really obviously underinsured, we are not willing to do it on that basis,” Thomas said.
In some cases, the disconnect is stark. “The rebuild of this particular property was about £20 million and they are trying to insure it for four,” he said.
Insurers are aware of the issue, but correcting it is not straightforward. “A lot of insurers know that a lot of these properties are underinsured, but it is a very difficult discussion to broach without risking losing the client,” Thomas said. “All they see is an increased premium.”
The tension between commercial reality and professional responsibility remains, compounded by a lack of trust and the erroneous belief that brokers are simply trying to increase premiums.
Where mortgage brokers are brought into conversations earlier, outcomes tend to improve, with Thomas noting that “probably 95% of our leads come from mortgage brokers.” That early involvement allows risks to be identified before completion, from environmental exposures to insurability constraints, rather than discovered when it is too late to act on them.
Regulation is adding further friction. EPC requirements, licensing changes and broader reforms are altering both the physical risk and how it is assessed, creating “a bit of a catch-22,” Thomas said, as “some of these things can improve the risk for insurers, but if it is the wrong product, that causes a massive headache.”
As pressure builds, the risk for brokers is not just technical, but strategic. If insurance is reduced to price alone, differentiation disappears. “If a product just becomes homogenised and is just almost like a race to the bottom of the cheapest price,” Thomas said, adding that comparison-led approaches risk stripping out essential cover.
What disappears in that process is advice, and with it, an understanding of how policies respond in practice. “If someone insures a building for a million pounds and it is actually worth two, the maximum they would get is 500,000,” he said. “They only pay out what is proportionate to the sum insured you should have had.” The implications are significant, yet widely misunderstood.
The gap is not theoretical. It only becomes visible when a claim is made, and by then, the outcome is already fixed.
In a market where assets are routinely mispriced and risk is poorly understood, the question is no longer whether cover is in place, but whether it will respond when it is needed.
