Why regular revaluations are important
By Rebeccah Dowell, March 23rd 2022
There are several reasons as to why regular revaluations are essential for any property owner or insurance manager and we have listed the key factors below:
Ensuring the Correct Sums Insured remain up to date
Ensuring the Correct Sums Insured remain up to date is both a cost consideration (Reinstatement Cost) and a time consideration (Reinstatement Period), and of course both factors interrelate. Therefore, both Declared Values and the Inflationary Provision applied as a Day-One Uplift require a regular review to ensure the Current Sums Insured remain accurate and the risk of underinsurance to policyholders is mitigated.
- Declared Value: Over the last 12 months alone, the construction sector has shown an increase of c.7% in pricing levels when reviewing the Tender Price Index of the Royal Institution of Chartered Surveyors (RICS), and c.11% when reviewing the General Cost of Building Index of the RICS. Reinstatement costs can therefore be seen to have increased significantly over the last year.
- Inflationary Provision: Due to supply chain and procurement issues, together with construction timeframes, lead times have all increased too. Consequently, the Reinstatement Period/Indemnity Period require monitoring to remain congruent with the market.
Furthermore, buildings are often extended and/or altered and the effect of this may not always be properly considered in the absence of on-site reassessment. A regular revaluation ensures changes to the subject property are captured.
Hardening of the market
As the cost of insurance has increased, insurers and underwritings are less willing to take on risk. A regular revaluation will increase underwriter confidence and hopefully lead to a reduced premium through accurate representation.
A policy and/or contractual requirement
Often it is a prerequisite in a policy for a property to be revalued every 3/5 years and neglecting to do so would lead to a policy breach. Furthermore, it is often a contract stipulation or lease covenant, and again failure to undertake regular reinsurance would lead to breach of contract.
The RICS Guidance Note on the Reinstatement Cost Assessment of Buildings states; “It is prudent to incorporate recommendations within [a] report to the effect that the client needs to reassess the sum insured on a regular basis, with an annual adjustment to reflect inflationary effects, and a major review and reassessment every three years, or earlier should significant alterations be made to the insured property.”
As an organisation of RICS Chartered Surveyors, our standard model is to offer an onsite assessment and a further extension of service covering 2 years desktop updates, following which we would recommend a return to site.
About Rushton International
Rushton International is an independent and impartial asset valuation and advisory firm. We specialise in the valuation of plant, equipment and buildings for insurance purposes. With our team of qualified and accredited valuers, we have the experience, qualifications and expertise to value any asset, anywhere in the world.Read more
Rushton International is a tried and trusted name in insurance valuations. Our valuation advice assists clients, risk managers and their brokers to accurately and confidentially set sums insured for the fixed assets in their insurance programme.More
We work with our clients to deliver comprehensive valuation advice for financial reporting purposes. By using our sector experience and market knowledge we are able to assist with the valuation of plant, equipment and other specialised assets in order to estimate fair value for GAAP and IFRS financial reporting purposes.More
Rushton International provides asset management solutions that are tailored to our clients’ needs. Our work ranges from asset verification, preparation of computerised asset registers and updating asset registers.More