As an insurance consultant, we have always advised our social housing clients to undertake regular valuations of their properties to ensure the rebuild values are sufficient and they are not at risk of being under or over insured.

Author: Martin Crowe


This approach is supported by the Building Cost Information Service (BCIS) who recommend rebuilding costs are checked at least every five years. One of the biggest risks for a social housing provider is being underinsured as this could result in insurers paying the sum insured declared, not the actual value of the rebuild. This leaves the organisation to pay any shortfall, which could be a substantial unexpected cost.

There are a number of other impacts of underinsurance, including:

  • Increased borrowing
  • Negative impact on balance sheet
  • Complex negotiations with insurers
  • Discontented leaseholders and social housing tenants
  • Extended rebuild times

In-between your valuations it is standard practice to increase your sums insured in line with the House Rebuilding Cost Index. This is a percentage calculated by BCIS based on the average cost of labour, materials and professional fees, and is applied to your sums insured to reduce your exposure to being underinsured. For many years this figure was in the region of 3-4%.

However, this has increased by almost 600% in the last three years and there is now a possibility that some housing associations could be over-insured and paying more for their property insurance than they need to.

Property Valuations – Under and Over Insurance in the Social Housing Sector

Increase in Index Linking

Since the start of the pandemic there has been a global increase in the cost of materials and labour, which saw the index linking figures rise from 3% in July 2019 to 6.7% in July 2020. As the impact of the pandemic started to ease, index linking stated to drop again, getting as low as 4.7% in February 2021. However, the continued global impact and shortage of materials meant it began to rise again and by October 2021 it was up to 8.8%.

In addition to the increase in materials and labour costs, the House Rebuilding Cost Index now takes in to consideration an allowance for Building Regulations Parts L, F, O & S. These are:

  • Part L – Conservation of Fuel and Power
  • Part F – Ventilation
  • Part O – Overheating
  • Part S – Infrastructure for the charging of electric vehicles

These amendments to the Building Regulations 2010 took effect in June 2022 and the introduction of these costs has seen the index linking figures rise dramatically in the last couple of months. The latest figures from BCIS have been released for July 2022 at 17.5%!1

What’s the impact?

Most insurers will require your sums insured to be index linked in line with the current BCIS figure to avoid underinsurance. This means your property insurance premium could instantly increase by 17.5%, regardless of any agreements you have in place with your insurer, and before you take in to account any growth in your property portfolio.

How can a valuation help?

As well as ensuring that you are not underinsured, a valuation can also ensure you are not over insured.

The BCIS rate is calculated on the average cost of rebuilding across the country, so it doesn’t take into consideration the labour and material costs in your region, which could be higher or lower than the average. It also applies a blanket allowance for the changes in the Building Regulations 2010, Parts L, F, O & S on your properties, again not taking in to account the specific costs and requirements in your area.

A valuation ensures that you have the right sum insured for your social housing properties, taking in to account all of the specifics relating to your buildings and their location. By undertaking a valuation you can be sure that your sums insured are correct in the event of a claim and you are not paying more premium than is necessary.

Do you need a valuation?

Please speak to your Gallagher representative if you would like assistance with a valuation. We work in partnership with reputable and experienced organisations who can undertake property valuations for insurance purposes.

Author Information


The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.