The price of settling property insurance coverage claims has risen since 2021, the Constructing Value Info Service (BCIS) warned.
Monetary Conduct Authority (FCA) information reveals that the variety of complaints about property insurance coverage have held regular lately, with the quantity within the first half of 2025 standing simply 3% increased than in H1 2021.
Nevertheless, provisions made by companies to settle complaints rose by 21% over the identical interval, lifting the common provision per criticism opened from slightly below £400 to virtually £470.
Richard MacLean, government director of BCIS, mentioned: “The inflationary pressures going through the development trade at the moment, together with labour shortages, rising materials prices and demand pressures from retrofit and energy-efficiency work, all enhance the chance of properties drifting into underinsurance.
“As prices rise, diverge regionally and differ by development kind, sums insured set even a couple of years in the past could now not mirror the true reinstatement worth of a house.
“Collectively, these pressures are reshaping the true price of repairing or rebuilding broken houses and, in flip, influencing the provisions insurers should make when disputes come up.”
Greater than 93,000 property insurance coverage complaints have been opened within the first half of 2025 throughout the UK, with companies setting apart greater than £43.6 million to cowl potential redress funds.
Buildings insurance coverage had a 63.2% claims acceptance charge in 2024, up barely from 63.0% within the earlier yr.
Mixed buildings and contents insurance policies had the next charge at 71.9%, however each stay nicely beneath most different insurance coverage merchandise, the place acceptance charges exceed 90%.
This disparity prompted Which? to file a super-complaint with the regulator, difficult what it sees as unfair declare definitions and practices throughout the house insurance coverage market, with a response from the FCA due this month.
Two superficially related properties can carry solely completely different threat profiles and value bases, on account of development type, situation, upkeep historical past and publicity to dangers equivalent to flooding or emergency response instances.
This inherent complexity helps clarify why acceptance charges for house insurance coverage have traditionally been decrease than for different classes and why rising development prices amplify pressures on each declare outcomes and insurer provisioning.
MacLean added: “Claims have gotten dearer to settle as a result of the true price of reinstatement has moved forward of what many policyholders perceive or have insured for. This widening hole is prone to depart extra properties underinsured except rebuild values are saved updated utilizing sturdy, construction-specific price information.
“For insurers, the rising provisions seen within the FCA’s figures characterize the downstream impact of structural shifts in development. As many within the development trade are realising too, that is our ‘new regular’, not a short-term anomaly, and insurers might want to regulate sums insured, pricing and claims choices accordingly.”
