Central Bank: Insurance firms must warn customers they may be underinsured due to inflation

Rebuild costs have soared by 17% in Cork, 18% in Limerick, and 24% in Waterford, so homeowners may not have adequate cover

The warning comes after the Society of Chartered Surveyors Ireland said the average rebuild cost for a home has surged by an average of 21% in the last year. Stock picture

The Central Bank has warned insurance companies they must do more to warn customers that their homes are underinsured following the recent rises in construction costs. 

The regulator has written to insurance firms outlining the findings of a review it conducted which found under-insurance in the home insurance market has increased from 6.5% in 2017 up to 16.5% in 2021. The review found that not all firms were sufficiently highlighting key risks to consumers.

The Central Bank said that for under-insured homes, the average reduction in claim payment was approximately 19% which meant those customers would have incurred substantial costs to fully meet the cost of their claim.

Last week the Society of Chartered Surveyors Ireland (SCSI) said the national average rebuild costs for a home have increased by an average of 21% over the past 12 months.

They said rebuilding costs had increased by 17% in Cork,18% in Limerick and by 24% in Waterford.

“Firms must communicate with all home insurance customers setting out the consequences of being underinsured, the reasons why this is currently a heightened risk and how policyholders can better estimate an adequate ‘sum insured’ value,” the Central Bank said.

“Some firms have proactively identified the risk to consumers, and have taken some steps to help mitigate the risk of under-insurance; however, all firms must take action to effectively mitigate the risk to the consumer.”

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“Firms do remind consumers of the need to review their sum insured; however, more could be done by firms to highlight the practical consequences of under-insuring their home,” the Central Bank said.

Its director of consumer protection, Colm Kincaid, said the actions were especially important at this time of increasing costs, which heightens the risk that consumers could be left without adequate insurance cover.