The Building Cost Information Service (BCIS) has partnered with risk management firm Intelligent AI to develop a platform that produces reinstatement cost assessments at the touch of a button. Easy and swift access to such assessments can help property owners to avoid being underinsured.
BCIS reinstatement data alone constitutes more than 1,100 dwelling models and 650 ancillary models, representing a wide range of supporting structures, components and features. These models are built upon input costs derived from upwards of 12,500 regularly updated supply prices, as well as labour, plant, and specialist rates, in total producing more than four million rebuilding cost permutations.
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Underinsurance is a persistent problem that leaves property owners vulnerable to significant losses, BCIS said, often caused by an outdated reinstatement value.
BCIS polled more than 200 professionals, predominantly from surveying and insurance roles, and asked what factors they thought contributed most to incorrect reinstatement valuations. More than one-third (36%) said a lack of regular re-evaluations, 24% said changes in construction costs, and 20% said inaccurate initial assessments.
Avoiding problematic data
James Fiske, BCIS chief executive, said: “Sadly, it’s not uncommon to find unreliable sources of data being used to inform sometimes major business decisions. This could be a property owner simply using market valuations for declared reinstatement values, or using inappropriate indices, like general inflation, to estimate movement in rebuild costs. In some larger organisations, there can be issues with data management where figures have been passed between teams, have come through an acquisition, or nobody is quite sure what the original source is.
"The use of problematic data is of course not limited to reinstatement values, but the financial risk in this area could be the most significant one a property owner or portfolio manager has, if they are exposed to considerable loss through under-insurance. On the flip side, having a clearer view of the rebuild costs also helps to avoid over-insurance, and over-paying on a policy."
Intelligent AI chief executive Anthony Peake added: “We’re essentially trying to avert disaster. In a recent test we did with an insurer, analysing a portfolio of 355 commercial properties, we found the reinstatement value to be £1.17bn underinsured.”
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