Underinsurance – the term used when a policyholders possessions or property are not insured for their full value – has been an issue for policyholders and insurers alike for as long as Insurancedealer can remember.

Regrettably it will always be an issue where it takes policyholders hours to sit down and, in effect, produce an inventory on a bi-annual basis to keep it accurate and has always dogged the traditional home insurance space. However it has become a significant problem in the MNW and HNW markets. Indeed, according to a report published by Post , 97% of brokers said some Mid Net Worth High Net Worth clients underestimate their insurance needs. Enquiring about the severity of the problem, 50% of those who identified it as an issue said six out of 10 of their clients underestimated their sums insured by, on average, 43%.

To give an example, lets say a customer insurers their contents for £200,000. A fire occurs and has caused a devastating £100,000 worth of damage. However, the loss adjusters established that in fact, the contents should have been insured for £400,000. Therefore, as the customer only paid for and insured only half of the contents they should have done, the claim payment would only be £50,000 – half of the claim.

This is a cause for concern – but brokers are in an ideal position to overcome the problem. Explaining the implications of underinsurance and ensuring clients have adequate cover will help build customer trust and retention. With an accurate assessment of the value of their buildings and contents insurance, some standard policyholders will be pushed into the MNW market while some MNW customers could become HNW policyholders.

The key in reality is to ensure that customers are speaking to the right people. Cheap landlords insurance and cheap let property insurance is not such an issue and can be purchased online via Insurancedealer, but for Mid and High Net worth household insurance it is always advisable to seek the assistance of a professional – contact GIRS who consistently deliver for their clients – 01932 450154.