Underinsurance – under the spotlight

RenovationUnderInsuranceThe term underinsurance might not be one that’s familiar to you, but it’s a significant issue in our industry. In our latest blog, we tell you what it is, why it’s an issue and who needs to be aware of it.

What is underinsurance?
In a nutshell, underinsurance is the provision of inadequate sums insured by the holder of an insurance policy. When you take out a renovation insurance policy, you are required to confirm the ‘rebuild’ value of the property (and any contents) that you want to insure along with the ‘contract value’ – a figure representing the total cost of the project to you. These figures are known as “the sums insured”. It’s important that the sums insured are correctly assessed.

In some cases, whether deliberately or not, the policyholder will declare a rebuild cost and/or a contract value which is lower than it should be. When this occurs, we call it underinsurance.

In the event of any claim, the confirmed sum insured value is what an insurer will pay out against. If that sum has been significantly underestimated, the claim pay out will be significantly reduced too. And in situations where the sums insured are grossly inadequate, the insurer is actually entitled to void the policy altogether.

We work very closely with brokers and renovators every day to identify the correct sums insured for new renovation projects; removing the very real risk of underinsurance. If we work with you, here’s what we’ll run through with you:

Building Sum Insured

We can guide you on the rebuild cost for a property in the event of a catastrophe. This figure is not the same as the ‘market value’ because the market value includes the price of the land your property sits on and other factors such as curb appeal.

  • Rebuild values are generally lower than market values for the reason stated above, but in the case of listed property, particularly Grade II* and Grade I, the reinstatement costs per square foot can be so high that the rebuild cost actually outstrips the market value.
  • We include VAT on the rebuild cost. Although new builds don’t attract VAT, most losses are only partial losses and, in these circumstances, VAT is applicable to the reinstatement costs.
  • The rebuild cost for a property can often be found on existing schedules of insurance, mortgage paperwork and/or formal building surveys. But bear in mind that, particularly in the case of existing schedules of insurance, there is no guarantee that the figure is correct. Additionally, if the documents referred to are more than a couple of years old, the figures are likely to be out of date.
  • Failing any of these, a rough idea can be gained by inputting a property’s square footage and postcode into the Building Cost Information Service (BCIS) from the Royal Institution of Chartered Surveyors (RICS).
  • If additional help is needed, we’d advise the instruction of a professional valuation, which would usually be around a few hundred pounds plus VAT for a standard property. Though this cost may stick in the throat, it will seem like money well spent when compared to the financial consequences of underinsurance.

Works Sum Insured

In a large scale renovation, a property owner or developer will be responsible for a number of costs and fees. We insure the total works sum – the total cash cost to the client – which should include:

  • the value of the main contract
  • the value of any subsidiary contracts
  • associated professional fees
  • direct purchases (such as bathrooms, kitchen, fittings etc.)
  • VAT where applicable

What happens if a renovation project is underinsured?
If a property owner or developer is in the unfortunate position of having to put a claim in for loss or damage to a property and/or the works themselves and there’s not enough insurance, there are going to be some serious financial implications.

Underinsurance is generally discovered when the loss adjuster appointed by the insurer turns up on site to assess the loss. He or she will, as a matter of course, and early on in the process, assess the adequacy of the declared sums insured.

If a property is found to be underinsured, the pay out for a claim is reduced in proportion to the percentage of underinsurance. For example, if a building is insured for £800k and it should have been insured for £1 million, then it is 20% underinsured. A claim for £10k would therefore be settled at £8k. A £2k shortfall that the insured is responsible for.

In the event of a large scale loss, a claim pay out may not cover the total cost of any rebuild, leaving the policyholder personally responsible for picking up the shortfall at a time of great disruption. Even worse, a large shortfall of funds made available in the claim pay-out may even leave the policyholder unable to complete the project.

Underinsurance isn’t something to be swept under the carpet. If a policyholder is underinsured, and attempts to make a claim, they will be found out. Make sure the property is adequately covered from the outset.

If you are looking to undertake a large scale renovation or are involved in a client’s renovation project, contact Renovation Insurance Brokers to discuss the insurance requirements. As the market leader in the sector, we are experts in placing renovation insurance. We’d be delighted to help you with yours.


Large-scale renovation erupts rows with neighbours – we share our views

Amberwood House
A row has erupted over what have been called “horrifying” plans to double the size of the former London home of prima ballerina Dame Margot Fonteyn. The excavation of a huge basement and the addition of an extra storey on its rooftop are set to transform the property – but it’s not all plain sailing.

Large scale renovations are complicated – and as a partner involved in the full process, there are a number of insurance and non-insurance challenges we see on the horizon.  We share some insights here…

Amberwood House, opposite the Victoria and Albert Museum in South Kensington, was sold in 2011 to developer Prime London Holdings; who are thought to have paid £12.5 million for the then run-down house.

The developer obtained planning permission to excavate a basement in the Twenties building and has recently unveiled plans to add a level on the roof too, which it is expected will be passed by Kensington and Chelsea council’s planning committee shortly. The total works would increase the footprint from 6,167 sq ft to 14,000 sq ft and could increase the property’s value to more than £50 million.

The basement works at the property are already underway.  As the experts in placing high value renovations, it’s no surprise that we are asked to provide cover on a large number of basement excavations. This type of building work sees no signs of abating despite the negativity they can face.  We always encourage clients to follow basement conversion best practice – something that we can confidently advise on thanks to our many years working on projects of this nature.

It’s fair to say that the work at the former home of the prima ballerina has not gone down well – with the neighbours’ views that the plans are out of keeping with the area.   And that’s before you even get into the “constant construction disruption” sited by another who lives nearby.  This response isn’t a surprise.  We see lots of cases where neighbours get extremely frustrated.   Keeping neighbours happy as far as it’s possible to do so is always good advice.

We just hope the developers of Amberwood House have good quality Party Wall insurance – it’s essential as, although it won’t remove the disruption, it will protect any neighbouring properties.  The Party Wall Act (which came into force in 1997 and applies throughout England and Wales) makes a property owner responsible for any damage that their renovation project may cause to a neighbour’s property.

Essentially, this act provides a framework for preventing and resolving any disputes that relate to party walls, boundary walls and excavations near neighbouring buildings. Over the five years to 2015, it was found that 3.7 million Britons had their property damaged as a result of their neighbours’ renovation works – so Party Wall shouldn’t just be seen as an optional extra.*

It remains to be seen how the renovation at Amberwood House fully develops –it’s certainly a big project, and one that will certainly require bespoke renovation insurance. It is projects like this that we insure each and every day.  Contact us to find out more about our work with large scale renovations.

* Cited in this Moneywise article


Storm losses and the importance of Party Wall Insurance

This article has been continued from our company newsletter, which can be found here: March Newsletter

Losses in sector during storm period

Though we avoided any serious problems during the extended period of storm conditions early in the year, we have had a couple of large losses. One relating to water damage and the other fire in a neighbouring property. Both are in London and both in the most expensive bracket which is disappointing, however it does go to show that losses in this sector do happen and when they do they are savagely expensive. I’d encourage you to look carefully at the standard cover and inner limits provided by competing products to make sure that your clients are adequately protected. It’s also a good opportunity to think about how you approach the contracts your clients are entering into and the strength of the insurers who back their contractors. It is not always the obvious areas that lead to problems so make every effort to know your client and assess the risks they are exposed to.

Importance of Party Wall insurance

Party Wall claims (Non-negligent Insurance) continue to occur with the highest frequency, though not always for the right reasons. As neighbours fall out over proposed renovations or damage caused as a result of a project, it’s clear that there are many misconceptions about what non-negligent insurance covers. We’ll be highlighting those in CPD sessions and information sheets to you over the coming months to try to tidy up this complex area.

If you think we could be doing something better then please let us know, it should be easy to do business with us.

Thanks as ever for your support.


Supporting a more unusual contract works requirement

Here at Renovation Insurance Brokers, we are experts in placing insurance for large scale property renovations and part of this is an ability to provide good cover for non-standard items.

In one of our most unusual requests, we were recently asked to arrange cover for a £500,000 church organ which was going to be installed at an insured property.

The custom-made organ was manufactured on the continent and was shipped to the risk address for installation towards the end of the project. We covered this valuable and fragile item from the point it was offloaded on site; tagging it on from the point that the cover provided by the shipper ceased.

ContractWorksOrgan

When referring to a property’s contents, we are looking at items that are loose; things that are not actually attached the property. But with the organ ultimately due to be physically fixed to the building, it needed to be identified in another way; as part of the ‘contract works’.

An item such as this will only be classed as ‘fixtures and fittings’, and therefore part of the Buildings sum insured, from the point of practical completion. Until that point, it is classed as an item of ‘contract works’. This is true of any item which is to be affixed to the structure.

An exceptional renovation requirement for sure, but just another fine example of the importance of a specialist renovation insurance broker who can work to support unique requirements in large scale renovation projects.

We are often asked to protect contents left on site during a renovation project – find out more here:


Stating our approach to a stately home renovation

It was recently announced by the National Trust that parts of Clandon Park House, the stately home that was reduced to a shell by a fire last April, are to be restored to their “original glory”. Read on for our outline of the key considerations for this type of large scale renovation project.

It is said that up to 95% of the Grade I-listed house, which featured in the 2008 film The Duchess starring Keira Knightley, was damaged in last year’s fire…so there’s a big renovation project ahead. As the market leader in placing renovation insurance, we know exactly what’s involved in renovating a property of this stature and historic sensitivity. Whilst we aren’t involved in the renovation of Clandon Park House specifically, we’ve used the property as the basis for this blog – highlighting the key points to note from a renovation insurance perspective for such a large scale stately home renovation.

ClandonParkHouse_Room

In all renovation works, the experience and competence of the contractor will be key. In the particular example of Clandon Park House, it becomes even more important. The restoration will be complex, will take a long time and the structure itself will be difficult to secure both structurally and from a security standpoint.

A suite of top notch liability insurances held by the contractor and the property owner will also be essential. The structure is likely to be unstable and relatively easy to access, and it’s likely there’ll be a lot of people on site at any one time. The potential for injury is quite high.

The plan is to restore the most important ground floor rooms at Clandon Park House to the majestic standard from the 18th Century, while the upper floors will be used for future exhibitions and events. In such a big project, and one that’s aiming to meet very exacting standards, it’s important that planning and conservation officers form part of the professional team. If they’re fully involved and welcomed this will maximise the likelihood of a smooth restoration all round.

Of course, using a construction specialist broker and insurer is essential – they will completely understand and appreciate the cover requirement and ensure the project gets the right cover. Large scale renovations like this are very individual. That’s why here at Renovation Insurance Brokers we take a bespoke approach to providing such specialist cover – exploring and understanding the individualities of every project and tailoring the insurance coverage to ensure the best possible cover.

_87768111_marble_hall2

Those involved in the restoration of Clandon Park House also need to be realistic about timescales. Structures of this type take a great deal of time to restore due to historic sensitivity. Being realistic about budget is important too. Restoration costs will be massively higher than a non-historic or non-sensitive structure of equal square footage.

In situations like this, a property owner has got to be prepared to spend a significant sum of money on the insurance package as part of the project budget too. Comprehensive cover for such an in depth project is important – and quality and credibly is key. It’s worth bearing in mind that where the damage being rectified is as the result of an insured event, the cost of specialist renovation insurance can form part of the claim under the previous property insurance coverage.

In any renovation project, you can never have too much information (the more the better) and open and transparent communication is hugely important throughout the process. There are likely to be changes to costings, interruptions in the progression of works and possible incidents on site. All these examples and many more like them have the potential to make the claim process fraught if insurers are not informed, so communication really is key.

We wish the very best of luck to all those involved in the Clandon Park House restoration. Our specialism is placing high value renovation insurance for a variety of properties – from Chelsea townhouses to country piles. We deal with unique renovation insurance requests here at Renovation Insurance Brokers every day. We’d be delighted to help you with yours.

Images courtesy of National Trust.

 


Renovation Insurance CPD makes waves in the broker market

We’re hugely excited to have launched a formal CPD training series for brokers this year. The excellent relationships we hold with insurance brokers all over the country are very important to us.

We work with brokers to support their client’s complex renovation insurance needs. The advice and know-how these brokers provide to their clients makes them incredibly valuable and we are committed to supporting them.

We’ve been offering dedicated training to brokers for some time, but we are so confident as to what our structured training offers, that we have developed a unique campaign to fully engage with our broker partners and proactively highlight the impact our training can make. We have a range of training dates available and we travel directly to a broker site to deliver the session, at a time that’s best for them. All for free.

If you’re one of the brokers we work with – or you’re interested in becoming part of our network – take a look at the details here.

Our training sessions enable brokers to understand:

  • When the need for specialist contract works cover arises
  • How to ensure the widest cover for the buildings and works involved
  • Liability in a contract works situation
  • Party wall insurance
  • Contractual implications
  • The legal & regulatory environment

The Renovation Insurance Brokers CPD training series – another strong example as to our commitment to our stakeholders, our expertise in the sector and our overriding passion to support large scale renovations across the country.


A look back at 2015

As we reach the end of 2015, we reflect on just some of the many things that have made our year here at Renovation Insurance Brokers.

We have spared you a RIB family photo with the office dog and hibernating tortoise but just wanted to share a few of the highs that made 2015 a great year for us, as we hope it was for you too.

A big thank you

None of what we do, we’d be able to do without you – so give yourself a hearty round of applause for being so supportive, at times understanding, but always committed to doing the right thing for your clients. Your faith in us and ability to advise your clients accurately sets you apart. Together we are a winning partnership.

As always, it’s been a very busy 12 months. We are very proud of our achievements and are pleased to share just some of our highlights here.

– Broker portal. Our unique broker portal has been very well received in the broker market since its launch last year and we have been pleased to see it continue to grow in popularity this year, as a key part of the quotation process. The quick quote system allows our brokers to get an immediate premium indication for some very basic information – obtaining renovation insurance quotes for their clients more quickly than ever before.

Interested in using the quick quote system for yourself? Take a look at this article for more information on how our Broker Portal works and to request login details. Don’t forget, we also offer bespoke CPD training too.

– Product development. We launched a brand new fixed price product for the broker market this autumn – specifically developed to offer a more marketable solution to insuring renovations in the mid net worth (MNW) sector. For brokers operating in the mid net worth sector this new online only policy provides the same market leading cover, at a very low price and is expected to prove very attractive.

We can now also offer ‘all risks’ unoccupied building insurance for properties which will be undergoing works, but at some point in the future. These properties do not fit onto the Renovation product immediately because the time period between the need for the Buildings cover and the start of the project is too great (max 2 months). The introduction of our new ‘all risks’ cover has been developed to offer a solution to projects that sit in this growing area. Just another example of our understanding of the market and our drive to develop products and services that offer you the very best options.

– New team members. Our team continues to grow so that we can provide the service levels you need. Just like last year, this year we were pleased to welcome two new members to the Renovation Insurance Brokers team.

Chris Harris arrived with us in October, as an additional underwriter to support our growth; with responsibility for underwriting all products as well as further developing business relations with the wholesale market.

Naweed Darr joined us as a marketing intern this summer and is now our full time Marketing Executive, helping us to maintain our strong brand and to communicate with you in a way that makes sense.

– Increased communications. Keeping in touch with our stakeholders is hugely important to us. This year we’ve introduced two new LinkedIn groups – one for HNW Brokers and another for Architect’s working with high value renovations – to educate, to inform and to facilitate online networking within each of our key markets. This very website has been enhanced too – to offer a clear proposition to the three key groups we work with – Architects, Brokers and Renovators.

– Charitable work. We’re proud to have continued to show our support for Grief Encounter, Rise Africa UK and The Game and Wildlife Conservation Trust (GWXT). Each of these three charities makes real impact in each of their individual areas and we are pleased to be able to work with them on a regular basis and raise awareness of the good things they do. To find out more about the different charities that we support, please take a look at our Good Causes page.

– Utilising our renovation expertise. Once again, this year has seen us place insurance for an array of high value, unique renovations. We always see a real mix of projects across a large geographical area – but one thing is consistent within them all; all being in need of an expert approach to their challenging insurance requirements.

In just a very small illustration as to what we’ve been involved with this year – we’ve provided cover for projects in the South of France as well as a growing number of central London properties, particularly basement projects which require large scale excavations.

We were also delighted to be chosen as the insurer of a stunning stately home on a remote Scottish Island this year, one with a project budget of over £20,000,000. Our very latest activity, finishing the year on a real high, is our work to insure the renovations of a £50,000,000 dwelling in London.

In summary: 2015

When looking back on the year, it’s always hugely rewarding to see where our successes lie, but more importantly, what impact we have had for the clients we serve. We are very proud of the strong and long established relationships we hold and the value we add to each and every project we have the pleasure of being involved in. Thank you to all of you who have helped to make 2015 such a fantastic year here at Renovation Insurance Brokers – we look forward to the activity ahead in 2016.

From all of us here at Renovation Insurance Brokers, sending you our very best festive greetings and wishing you a happy, healthy and prosperous New Year.


Increased underwriting capacity to support rising demand for specialist insurance cover.

We are pleased to announce the arrival of an additional underwriter to support our growth. Chris Harris has joined existing senior underwriter Matthew Dover in the team at Renovation Insurance Brokers.

Chris will be responsible for underwriting all products – using both manual and portal systems – and will also further develop and foster business relations with the wholesale market. Chris already brings strong underwriting skills to the team, built up during his four years as an underwriter at Renovation Plan.

Speaking of Chris’ appointment, Douglas Brown, Managing Partner of Renovation Insurance Brokers said: “A large scale renovation requires a very specific renovation policy and the market requirements continue to grow. With the addition of Chris to our experienced underwriting team, we are able to continue to work to the high standards we pride ourselves on and offer the very best and competitive insurance solutions for brokers and their client’s renovation project professionals.”

After an initial period at our offices in Cambridgeshire, Chris will be based at our office at Holland House in London to support our growing work in the city.

News of this new recruit comes on the back of another announcement from Renovation Insurance Brokers last month – the launch of a new online fixed price product for brokers operating in the mid net worth renovation market.


The future of broking – we’re ready!

Future of BrokingWe’re heading to the Broker Expo in Coventry this week, described as the premier event for insurance brokers looking for fresh ideas for nurturing existing business and for sourcing new market opportunities. As the market leader for renovation insurance, with strong relationships with brokers across the country, we’re looking forward to being part of it!

One of the programme elements has particularly caught our eye – a digital think tank that will explore the key issues surrounding the Future of Broking as it develops digitally. The insurance sector is advancing and developing at a fast pace and we are really proud to be part of the mix.

We are told the future of broking is digital – something that we saw coming some time ago, developing new products to meet these expectations and to support business growth. We tell you more here.

So, is technology increasing the workload for brokers?

The very nature of technology is that it is designed to make things quicker, easier and more convenient. That’s very much the approach we’ve taken with the development of our bespoke broker portal – providing the ability to connect into our renovation insurance products at the click of a button.

With resources stretched and time at a premium, our broker web portal has been developed to help our broker partners obtain a quote quickly. This ‘Quick Quote’ system offers an indication of the likely premium from just six pieces of basic information. Reducing the time that it takes for brokers to get quotations and to bind business is important to us all.

Are brokers losing their personal touch in an increasingly digitised world?

Just because technological advancements now support a broker’s work, digital does not mean depersonalisation. At the heart of a broker’s work is their relationship with their client – technology does not remove that or make it any less important. In fact, digital can actually help that relationship.

In any customer situation, we want to be served well. In the renovation insurance sector specifically, our clients want high quality products, expert knowledge and a quick turnaround. Our online broker portal is a key sales aid in that process – our partners can set client expectations early and let customers become more attuned to the costs of this class of business before having to buy a policy. A clear and consistent approach that clients will be happy with – and a great customer experience all round!

In our sector, it’s not just the future that’s digital – but the present too. We are delighted to be working with a growing number of broker partners to utilise our online offerings and are excited about the impact that digital is already making in the renovation insurance area specifically.

Want to know more?

If you place renovation insurance and are not yet part of our broker network, please get in touch to find out more about working with us and accessing our online portal. Once in the portal you’ll have access to the Quick Quote facility, our new MNW £950 product and a full quote and bind system for both our HNW and MNW products that produces policy documentation.

Broker Expo takes place at Coventry’s Ricoh Arena on 12th November 2015, presented by Insurance Age magazine. The 2014 event attracted over 800 representatives from broking firms in the UK. We’ll be live tweeting using the hashtag #brokerexpo if you want to join us on the day – just follow us on Twitter here.