Buildings insurance complaints highlight need for reliable data

Buildings insurance was the fifth most complained about financial product or service in 3Q2023, according to the latest data published by the Financial Ombudsman Service (FOS). 

The service received 1,666 complaints about buildings insurance, which was almost 30% up on the same period in 2022. 

Of the 1,666 complaints, 323 cases were referred to an ombudsman and 43% were upheld. 

The FOS said that the rise in some insurance complaints is due to an increase in insurers delaying claim payouts, contractor availability impacting the speed of repairs, and an inability to source materials. 

Another common cause for complaints related to building insurance policies is underinsurance, where the consumer does not receive their claim in full, or at all, because the estimated rebuild cost provided is too low. In these instances, when the ombudsman investigates a complaint, they look at the information that was provided by both the insurer and the insured, and where the rebuild estimate came from.

FOS has also increased its claim limits, to £430,000 for complaints referred to it on or after 1 April 2024 about acts or omissions by firms on or after 1 April 2019.

Barrett Corp & Harrington Ltd (BCH), which provides rebuilding cost valuations across the UK, said of all the instructions its surveyors had in 2023, underinsurance was found in 67% of cases and overinsurance in 21%. 

Movement in BCIS rebuilding cost data, which is used extensively across the insurance industry, shows just how volatile construction has been over the past few years, and how important it is for rebuild estimates to be based on reliable, up-to-date data. 

Growth in the ABI/BCIS House Rebuilding Cost Index, which is used to update the BCIS Rebuild Online service and by insurance companies to update cover through the duration of an annual policy, peaked at 19.4% in December 2022, driven particularly by soaring materials cost inflation and the additional cost of adhering to updated building regulations. 

While materials cost inflation has cooled considerably – annual growth in the BCIS Materials Cost Index is currently in negative territory – prices in many house building trades remain high and disruptions to shipping in the Red Sea, as well as wider conflict in the Middle East, present an inflationary risk.

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