The Central Bank has warned insurance companies they must do more to warn customers that their homes are underinsured following recent increases in construction costs.
The regulator has written to insurance companies outlining the findings of a review it conducted which found underinsurance in the home insurance market fell by 6.5% in 2017 to 16.5% in 2021. The review found that not all companies highlighted key elements sufficiently. risks for consumers.
The Central Bank said that for underinsured homes, the average loss payment reduction was around 19%, meaning those customers would have incurred substantial costs to fully cover the cost of their claim.
Last week, the Society of Chartered Surveyors Ireland (SCSI) said the national average costs of rebuilding a house had risen by an average of 21% over the past 12 months.
They said rebuilding costs rose by 17% in Cork, 18% in Limerick and 24% in Waterford.
“Companies should communicate with all home insurance customers explaining the consequences of underinsurance, why it is currently an increased risk and how policyholders can better estimate a value of ‘ sum assured’ adequate,” the Central Bank said.
“Some companies have proactively identified consumer risk and taken steps to help mitigate the risk of underinsurance; however, all businesses must take steps to effectively mitigate consumer risk.
“Firms are reminding consumers of the need to review their insured capital; however, companies could do more to highlight the practical consequences of underinsurance of their home,” the Central Bank said.
Its director of consumer protection, Colm Kincaid, said the actions were particularly important at a time of rising costs, which increases the risk that consumers will be left without adequate insurance cover.