Rising Inflation leads to a worrying increase in underinsurance
Underinsurance is increasing due to rising prices and inflation, according to one of Britain’s top valuers, Tim Belson, CEO of Prestige Valuations
Underinsurance is seeing an alarming increase as rising prices and inflation-related belt-tightening has left thousands unknowingly at risk.
Over the last 12 months, the price of gold has increased by almost 20%, and diamond prices have risen 25% since last August.But while this, on the whole, is considered good news for those that hold gold and valuable jewellery it does present challenges to the Insurance Industry. For if they have not had their items revalued, they run the risk of being underinsured, meaning a like-for-like replacement in the event of theft or loss could prove impossible.
While it is generally quite good news for consumers that the price of gold, diamonds and coloured stones has increased massively over the last year, when you couple this with the inevitable spending squeeze that comes hand-in-hand with the massive inflation we’re seeing, a lot more people do not have adequate insurance to cover their valuables.
By our estimates, upwards of 70% of people do not have insurance policies with adequate coverage that would grant them a like-for-like replacement, but this figure is sadly on the increase.
I have been in the jewellery and insurance industry for more than 35 years, and I unfortunately come across underinsurance on an almost daily basis. And there are trends, which we should be aware of. For example, during periods of high inflation as we are seeing now, underinsurance increases, as even those that would normally go for revaluation at regular intervals push appointments back in a bid to save a bit of money. Ultimately, though, those cost-saving measures can spectacularly backfire at the point of claim, when customers realise they will not be able to get a like-for-like replacement as gold and diamonds have gone up in value.
Gold, diamonds, other precious gems and metals and designer watches have increased in value so significantly over the last 12 months that many current insurance policies will not be adequate to cover a like-for-like replacement. When people initially take out an insurance policy on their jewellery, they generally know how much it’s worth, but over time, if they just choose to reinsure at the same value, eventually those policies will become redundant, as replacement costs will outweigh the insured sum. Therefore, they need to get their items revalued.
That is obviously great for those lucky enough to own such precious timepieces, but without proper insurance cover, problems can arise.