Post Covid the inflation rate on staff costs, materials, extra taxes etc has seen pressure across construction, and repairs. Recent shortages of skilled tradespeople are likely to get worse in the UK, as the reward package for not working continues to pull away from the minimum wage, pre-tax, pre-bills income. In short, many have calculated it isn’t worth working in net household income terms.
What that means long term is hard to assess, but for insurers in commercial and domestic property it’s time for a reset on Buildings quotes. The existing maths simply don’t add up. Here are some insights from BCIS;
The Building Cost Information Service (BCIS) is warning the cost of settling property insurance claims is rising as a result of deep-rooted pressures within construction, some of which have intensified since 2021.
Recent Financial Conduct Authority (FCA) data shows that the volume of complaints about property insurance has held steady in recent years with the number recorded in H1 2025 just 3% higher than in H1 2021.
However, provisions made by firms to settle complaints rose by 21% over the same period, lifting the average provision per complaint opened from just under £400 to almost £470.
BCIS executive director Richard MacLean said: “The inflationary pressures facing the construction industry currently, including labour shortages, rising material costs and demand pressures from retrofit and energy-efficiency work, all increase the likelihood of properties drifting into underinsurance.
“As costs rise, diverge regionally and differ by construction type, sums insured set even a few years ago may no longer reflect the true reinstatement value of a home.
“Together, these pressures are reshaping the true cost of repairing or rebuilding damaged homes and, in turn, influencing the provisions insurers must make when disputes arise.”
The FCA reported more than 93,000 property insurance complaints were opened in the first half of 2025 across the UK, with firms setting aside more than £43.6 million to cover potential redress payments.
FCA data found buildings insurance showed a 63.2% claims acceptance rate in 2024, up slightly from 63.0% in the previous year.
Combined buildings and contents policies had a higher rate at 71.9%, but both remain well below most other insurance products, where acceptance rates exceed 90%.
This disparity has prompted Which? to file a super-complaint with the regulator, challenging what it sees as unfair claim definitions and practices across the home insurance market, with a response from the FCA due this month.
Even before reinstatement is considered in detail, two superficially similar properties can carry entirely different risk profiles and cost bases, as a result of construction form, condition, maintenance history and exposure to risks such as flooding or emergency response times.
This inherent complexity helps explain why acceptance rates for home insurance have historically been lower than for other categories and why rising construction costs amplify pressures on both claim outcomes and insurer provisioning.
MacLean added: “Claims are becoming more expensive to settle because the true cost of reinstatement has moved ahead of what many policyholders understand or have insured for. This widening gap is likely to leave more properties underinsured unless rebuild values are kept up to date using robust, construction-specific cost data.
“For insurers, the rising provisions seen in the FCA’s figures represent the downstream effect of structural shifts in construction. As many in the construction industry are realising too, this is our ‘new normal’, not a short-term anomaly, and insurers will need to adjust sums insured, pricing and claims decisions accordingly.”
Data published by the ONS suggests the construction workforce has shrunk to its lowest level in almost 25 years, which means reinstatement takes longer and carries higher rebuild costs. This results in sums insured falling out of step faster than many policyholders realise.
Further pressures include requirements from the Building Safety Act, alongside heightened expectations for fire resistance, insulation performance, airtightness and working standards.
Generic rebuild calculators can struggle to capture the nuances of systems installed in newer homes such as engineered timber solutions or ventilated cladding systems, making accurate reinstatement values difficult without construction-specific data.
The fees for preliminaries, plant and professional fees have soared, whilst climate change related events increase in severity and frequency, adding fuel to the fire of an increasingly complex nature of modern reinstatement.
For more information about BCIS, please visit: www.bcis.co.uk
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