Insurance Gaps Caused By Inflation

Insurance Gaps Caused By Inflation


According to a new report by TÜV SÜD Global Risk Consultants, inflation has led to insurance coverage gaps and disaster resilience problems for many companies. These coverage gaps arise due to losses from natural disasters – such as hurricanes and wildfires – resulting in claims that do not cover rebuilding or replacement costs.

The report found that many companies unintentionally underreport the valuations of their properties and equipment to insurance carriers, leading to mismatches between reported and actual values. This ultimately results in coverage gaps.

The report cited rising construction costs as a significant factor, with everything from paint to wallboard to roofing contractors becoming increasingly expensive in an inflationary economy. David Rix, global sales manager at TÜV SÜD Global Risk Consultants, emphasized that companies must defend their values because underwriters are now requiring more data on how they determined asset valuations.

However, many companies are not prepared for this, leaving them unable to collect enough to restart their business flow after a claim.

The report also highlighted that property valuation is a crucial foundation of property underwriting and impacts various aspects of the insurance risk transfer process. This includes projected claims values, replacement costs, adequacy of coverage, and inflation considerations impacting future physical asset and business interruption values.

Risk managers are advised to partner with seasoned valuation specialists to establish credible property and equipment valuations for underwriting.

The report, titled "How Inflation Led to Property Insurance Coverage Gaps," also includes year-over-year inflation data on construction and labor costs. Additionally, it is discussed why rising construction prices lead to inaccurate insurance claims and coverage gaps.

Justin Chen, global manager for property valuation services at TÜV SÜD Global Risk Consultants, suggested that companies with large real estate portfolios should update their statement of values (SOV) every three years or more to avoid coverage gaps.

If you are unsure if your organization has reported accurate property and equipment values, reach out to one of our licensed experts today at 905-696-9090 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it..

In the last two years, Hubbard Insurance Group has helped pay out over $7.5M in claims to our clients. Reach out to us today to make sure you have the right protections in place!


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