Many consumers not fully covered with home insurance, warns Central Bank

Central Bank review finds under-insurance in the home insurance market has increased from 6.5% in 2017 up to 16.5%

Many consumers are at risk of not being fully covered for their losses if they have to make a home insurance claim, the Central Bank has warned.

The regulator has identified evidence of increasing levels of under-insurance in the home insurance market following a review.

Under-insurance occurs when the sum insured on a property is less than the amount it would cost to rebuild or replace the property.

It found under-insurance in the home insurance market has increased from 6.5 per cent in 2017 up to 16.5 per cent in 2021.


It also found that not all firms were sufficiently highlighting key risks to consumers and said they must take further action.

The Central Bank has written to insurance firms outlining the findings. The review was undertaken because consumers are currently facing increasing rebuild costs, which affects the level of insurance cover that a consumer should have on their property.

Research from the society of Chartered Surveyors in Ireland published earlier this month found rebuilding costs have jumped by more than a fifth over the past year, meaning homeowners are almost certainly underinsured on their homes, should they be destroyed by fire or otherwise.

The Central Bank said that for those who have had their claim reduced due to under-insurance, the average reduction in the claim payment was approximately 19 per cent in 2021, meaning that those customers would have incurred substantial costs to fully meet their costs.

There are differences in the way insurance firms present and provide key information to consumers. Firms do remind consumers of the need to review their sum insured, but the regulator said more could be done to highlight the practical consequences.

Some firms have proactively identified the risk to consumers, and have taken some steps to help mitigate the risk of under-insurance. However, “all firms must take action to effectively mitigate the risk to the consumer”, it said.

Central Bank director of consumer protection Colm Kincaid said: “This review highlights the actions we expect of firms to ensure consumers are properly informed about the risk of under-insurance, and to provide them with relevant and clear information.

“This is especially important at this time of increasing costs, which heightens the risk that consumers could be left without adequate insurance cover.

“We expect all firms to be proactive in identifying emerging risks to consumers and to support their customers in mitigating those risks. This requires firms to have a fully embedded and fit-for-purpose consumer protection risk management framework.”

The Central Bank also appealed to consumers to check they have adequate home insurance cover in place when renewing or switching their policy.

“When reviewing home insurance cover, consumers should not focus on the premium alone but also on the level of buildings and contents cover that is currently in place to ensure it remains appropriate,” it said.

“These details should be reviewed regularly, checking with their insurer or broker as appropriate, to avoid the risk of receiving a reduced payment in the event of a claim.

“The Central Bank also asks that consumers fully consider any communications that insurance firms provide in relation to the risk of under-insurance, especially at this time.”

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter