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NBS News

Ensuring Businesses are not Underinsured

NBS Underwriting

20 October 2022

In the UK, there are 5.6 million small or medium-sized enterprises (SMEs) and worryingly it is estimated that approximately 80% of these are underinsured.

The sizeable underinsurance problem has been amplified, in the last 2-3 years, by an unprecedented increase in material costs and wages, along with a labour skill shortage. This has resulted in a large increase in the cost to rebuild which is considerably higher than the rate of inflation.* The current cost-of-living crisis, coupled with this, means we will see more and more businesses underinsured or with incorrect business interruption levels.

The consequence of an SME being underinsured may not become evident until the point of claim. This could be catastrophic for businesses; the reduced claim payment means they would have to fund the additional costs, which many businesses simply cannot afford. Forcing many to close their doors for good. This is an outcome we are all trying to avoid.



At NBS Underwriting, we want to support you and your clients, to prevent SMEs becoming underinsured and an average condition being applied, whenever we can.

We understand the difficulty that business owners face, especially in the current climate, when calculating precise sums insured. This is why, we have recently introduced a buffer to reflect the issues we are seeing in the marketplace.

NBS policies now include one of these special provisions:

The reinstatement basis of settlement clause
If the declared value/ sum insured is less than 85% of the reinstatement value, the amount payable will be proportionately reduced meaning average will only apply if the declared value is less than 85% of the reinstatement value; or

Day one
Providing that, at inception of each period of insurance, the declared value of the property is supplied, NBS will cover up to 115% of that value.**
Please note, if the declared value at the start date was inadequate average will still apply.


We know this is not a new problem, but the together with our brokers, we need to highlight to business owners, the importance of ensuring that sums insured are at an adequate level. We have produced some information for business owners highlighting the issues around underinsurance, this will be issued with policy documentation.

Whilst we provide some protection against rising costs, we suggest that if business owners are unsure of the true value of their property, they arrange a revaluation to be undertaken.

It is recommended by the Royal Institute of Chartered Surveyors (RICS) that a Reinstatement Cost Assessment is undertaken every three years, or earlier if significant alterations are made to the insured property. This should be undertaken by a professional such as Cardinus Risk Management.


Over the last 3 years Cardinus Risk Management have helped customers address over £9bn of underinsurance and in 2021, 80% of commercial properties assessed by them were underinsured. Again confirming the extent of the underinsurance issue in the market.

Click here to find out more about Cardinus Risk Management or

To make an enquiry call 0207 469 0262 or email


* BCIS house rebuild cost for Aug 2022 stated as 19% click here for more information

** Excluding NBS Underwriting care home policies