• Rising inflation is leading to widespread commercial property underinsurance in the UK – as the cost of building materials and labour increase – and availability of both decrease
  • Claims managers responsible for commercial property repairs estimate that businesses that have not reviewed their insurance could be liable for over 40% of the value of repairs or rebuilds on average due to underinsurance
  • Over four in 10 commercial property owners (43%) who have repaired or rebuilt their commercial premises in the last 12 months were underinsured
  • Two-thirds of business leaders who own their premises say they haven’t reviewed their insurance in the past year despite dramatic increases in costs associated with repairing properties
  • Gallagher is currently working with its clients to address the problem and urgently advises business owners to undertake a property valuation to ensure in the event of making a claim they have adequate insurance in place

Two in five (40%) commercial properties in the UK are currently underinsured, according to research by global risk management and insurance broker Gallagher.

In research amongst business owners and commercial property claims managers, Gallagher found that the shortfall of underinsured properties was an average of 43% against the rebuild value covered by their insurance – and where there is a gap, businesses are likely to be liable to pay the difference.

Almost all the claims managers Gallagher conducted the research amongst (96%) said there has been a rise in the number of properties that are underinsured in the past 12 months and the root of the underinsurance problem is the rapid inflation in the cost of building materials. By way of example, in October 2022 Government data showed a 16.7% increase for ‘all work’ year-on year and more specifically the cost of cement increased by 18% between September 2021 and September 2022, with steel up by 13%2 and the price of timber up by 35% year-on-year in 2021 - 20223.

In addition, 61% of claims management experts said that more properties are also underinsured in part due to rising labour costs. When it comes to what’s causing construction labour cost rises, 85% cite inflation, and just over three-quarters (77%) say that Brexit is a major factor due to the decreased availability of labour.

The majority of business leaders who own their premises (65%) have not reviewed their commercial property insurance during the past year, indicating that many could now be at risk. Some have gone even longer without looking at their policy, with one in six (16%) not having reviewed their insurance at any point in the last five years.

Gary Fletcher, Gallagher’s Managing Director for the South in the UK said: Property underinsurance is at a record high currently because of issues such as inflation and the rising cost of materials, however business owners also often make the mistake that the valuation of the property is based on what it would sell for – and as property prices haven’t changed a great deal over the last year – that the valuation is the same. In fact, the valuation is based on rebuild costs which have unfortunately risen dramatically over the last year. As a broker we advise our clients on their insurance, and the need to review their cover when issues like this arise, but some businesses won’t necessarily realise the extent of the issue.”

The most common reasons amongst business owners for not reviewing their property valuation was thinking nothing had changed since last time they checked (29%), trying to keep insurance costs down while inflation is causing budget constraints elsewhere (23%) and simply being too busy with other priorities (20%) to think about it.

Despite this many who own their premises say that one or more of their properties has needed major repairs (18%) in the past 12 months. Of those whose premises were damaged and they made a claim on their insurance, 43% reported that they were underinsured.

Claims managers also say that it is taking longer for commercial property repairs to complete – taking an average of an additional 33% compared to this time 12 months ago. This is because of supply chain delays and the lack of available construction workers. As a result, the overwhelming majority of claims managers (80%) say many businesses may have too short a term specified on their business interruption cover. This is the insurance that pays for loss of earnings whilst a property is unusable. The vast majority (71%) of business leaders whose premises needed major repairs in the past 12 months reported that they had to close at least one of their buildings as result, indicating that the risk of interruption remains high for those affected.

Gary Fletcher added: “Business leaders have a range of increasing costs to cope with at the moment as inflation remains stubbornly high but the knock-on effect of inflation on commercial property and business interruption insurance shouldn’t be ignored. Your insurance broker can advise how to go about a valuation to ensure that cover is valid. With construction and labour costs as they are – and supply chain issues meaning businesses who need to repair or rebuild might be closed for longer than expected – it is currently very important to make sure you take time to check your cover.”


2. Overall costs and cost of concrete and fabricated structural steel from Monthly Statistics of Building Materials and Components, published by: Department for Business, Energy and Industrial Strategy, 2 November 2022

3. Cost of timber from Ibis World Timber Price Index, 28 September 2022. All data unless otherwise stated is from research conducted by 3Gem, between 8 May and 16 May 2022, among 1,000 senior decision makers in UK businesses.


Data within this press release is derived from two key sources:

• Where indicated that the data comes from claims managers, this is based on a sample of 106 insurance claims managers with final responsibility for managing commercial buildings claims

• Where indicated that the data is from business leaders, this is based on a sample of 503 board-level executives working at UK businesses who own their own premises and/or commercial property landlords.