More than half of UK brokers say the problem is worsening, and incorrect valuations are almost always to blame
Three quarters of UK brokers working in the non-standard property market have reached the same conclusion: the underinsurance crisis is not being driven by customers cutting corners on cover. It is being driven by valuations that were wrong from the start, and by reinstatement costs that customers do not fully understand.
That is the headline finding of new research from Prestige Underwriting, a managing general agent (MGA) authorised by the Financial Conduct Authority (FCA).
The survey of 98 brokers active in non-standard markets, conducted across two fieldwork periods in 2026, found that 76% point to incorrect property valuations or a lack of awareness about reinstatement costs as the primary cause of underinsurance in their client base. Only 24% attributed the problem to customers reducing cover to save money.
The finding invites a harder question: why are so many valuations wrong in the first place?
The gap between market value and rebuild cost
A persistent cause of underinsurance is the confusion between market value and rebuild cost. Many insurance sums insured are still derived from mortgage or loan security valuations, online rebuild calculators, or standard rates intended for modern buildings — methods that systematically underestimate risk for non-standard and heritage properties.
This is not a marginal problem. Research based on 46,917 rebuild cost assessments carried out across the UK in 2026 found that just 8% of properties were insured accurately — 67% were underinsured, and a further 25% were overinsured.
Why non-standard properties are hardest to get right
The Prestige Underwriting survey identified the property types most vulnerable to underinsurance: non-standard construction (cited by 65% of brokers), listed or heritage homes and unoccupied or probate properties (56% each), thatched properties (26%), homes with subsidence history (18%), and flood-exposed homes (15%).
Each of these categories shares a common problem. Their true reinstatement cost cannot be reliably estimated using the tools and methods that work for a standard modern house. A listed building may require lime mortar, handmade brickwork, and conservation officer approval before a single stone can be replaced — all of which add time, complexity, and cost that generic calculators do not account for.
New building regulations compound this further: the need to meet current building standards, including mandatory requirements around energy efficiency, can increase the modern rebuild cost significantly compared to the original build cost.
Awareness as a structural problem
Another driver identified in the research is lack of awareness about reinstatement costs. A customer who has never been clearly shown the difference between what their home is worth on the market and what it would cost to rebuild it from the ground up has no basis on which to question a figure that is too low.
That awareness gap is not simply a failure of customer engagement: it reflects the degree to which rebuild cost has historically been treated as a technical input rather than a central part of the advice conversation.
Alison Williams, Managing Director at Prestige Underwriting, is direct about where responsibility sits. She said: "Underinsurance is a serious issue, but the research shows the causes are not limited to customers cutting cover because of cost pressures."
She added: "Brokers have an important role to play because they can ask the right questions, explain why rebuild values matter and guide customers towards appropriate cover. That should include checking how and when a rebuild estimate was obtained and whether changes to the property mean it needs reassessment."
Under the FCA's Consumer Duty framework, fair value in insurance is directly tied to the product's performance at the point of claim — which means a customer who suffers a shortfall because their sum insured was based on an outdated or inaccurate reinstatement figure represents, by regulatory definition, a poor outcome.
For brokers advising on non-standard homes, a renewal conversation that does not include a discussion of how and when the rebuild estimate was obtained, and whether the property has changed since, may not meet the standard the regulator now expects.
Williams added that MGAs and specialist insurers have a role to play alongside brokers: "For specialist insurers and MGAs, the priority is to support brokers with clear underwriting guidance, access to underwriters and the expertise needed for more complex homes."
Brokers need better tools, clearer guidance, and more direct access to underwriting expertise at the point of renewal, not just at the point of sale. For properties that require specialist assessment, the industry's reliance on index-linked carry-overs is not an adequate substitute.
The Prestige Underwriting research is a useful checkpoint. The underinsurance problem in the non-standard market is not new, but the evidence that its root cause lies in the valuation and advice process should prompt a reappraisal of how renewal conversations are structured and what brokers are expected to verify before recommending cover.
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