Category Archives: Insurance

The Importance of Keeping Your Values Up to Date and How to Avoid Under Insurance

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Over my 28 years working in the Private Client industry working for specialist insurers, and consulting in the High Net Worth (HNW) space, I have seen numerous cases of inadequate cover. Incredibly up to 75-80% of HNW homes are estimated to be underinsured (Datamonitor report 2015).

I recall going with a broker to see one of their clients in London to review the value of their contents and valuables. The client’s wife casually enquired what the general contents were covered for and I’ll never forget her response when she was informed of the amount … ‘darling, that wouldn’t even cover my handbags’ – which incidentally were ‘serviced’ annually in New York. The sums insured were subsequently reviewed and there was a more than threefold increase in cover.

In another example, following an unfortunate fire at a substantial home, the total contents cover was almost exhausted in one room where the curtains alone were worth £70,000. They were completely damaged by smoke, rather than the fire itself. Whilst the insurer was sympathetic to the client’s position, they had not received adequate premium as the sums insured were hugely understated, and the insurer asked the client to pay backdated premium for the correct sums insured. The broker involved was grateful for the insurers approach, although had not spotted the degree of under insurance.

Why are HNW homes more at risk from underinsurance?

Value of certain items increase over the years such as jewellery, art and even wine.
Items made of precious metals and valuable stones are highly influenced by fluctuating markets, which can lead to significant increases.

Bill Baker of Porticus Insurance Consultants Ltd, a specialist HNW broker based in London commented on his experience:
‘We recommend that our clients’ jewellery is valued every 2-3 years to avoid under-insurance. We know many are not properly covered and when they do have a new valuation, we see very significant uplifts in values. We also regularly see under-insurance of contents in the high net worth sector. The replacement costs of contents in a typical detached family home can easily be £250,000 or significantly more depending on the quantity and quality of clothes, shoes, handbags, carpets, curtains, sports equipment and furniture’.

So how do insurers deal with under insurance at the time of a claim?

HNW insurers stipulate in their policy terms that items of contents and valuables need to be insured for their full value, and their adequacy will be reviewed at the time of a claim. If the amount is not adequate, they will require as a minimum that the sums insured be revised, and the correct premium collected. At worst they can potentially void the policy if there is deliberate misrepresentation, and or non-disclosure.

These insurers often individually list on the policy items over a certain value for jewellery, art and precious metals, and then cover them on an ‘agreed value’ basis. At a time of loss, the insurer will pay out the amount on the schedule, although not a higher amount if the item costs more to replace, which can be the case if the item has not been recently valued.
Most non-HNW insurers will apply average, where the amount paid out is proportional to the amount underinsured, so if the underinsurance amount is 50% for example, then only 50% of the claimed amount will be paid.


How to avoid underinsurance:

  • Have a professional assessment by a specialist valuer such as Doerr Dallas Valuations, to keep the values of your contents and precious items current. They offer an initial walk through valuation for £500 plus VAT, which will highlight any underinsurance on contents, as well as comment on the adequacy of jewellery cover. If there is significant underinsurance a full valuation will be recommended
  • Review your sums insured on a regular basis, considering movement in prices, for example the recent increase in gold prices
  • Undertake a full review of your home contents, including carpets and curtains, clothing and shoes, sports equipment, and items kept in cupboards, garages and garden rooms
  • Speak to a specialist HNW broker, who will offer you independent professional advice about how to protect your valuable assets, and recommend a suitable insurance policy for your needs

Does Your Current Insurance Reflect Art Market Increases?

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Yayoi Kusama –
KOKORO (Heart), 1988

We asked our Head of Contemporary Art, Ben Hanly, to look at how values have changed over the past few years to illustrate just how important it is to have the value of your collection updated regularly. We think you will be shocked by the results!


David Hockney (British, 1937)
Pool Made with Paper and Blue Ink for Book, 1988
Lithograph, edition of 1,000
26.5cm x 22.5cm

2015 – £10,000

Now – £25,000


Yayoi Kusama (Japanese, 1929)
KOKORO (Heart), 1988
Acrylic on canvas
65cm x 53cm

2006 – £45,000

Now – £225,000


Andy Warhol (American, 1928-1987)
Marilyn (no. 31)
Screen-print, edition of 250
91.4cm x 91.4cm

2015 – £175,000

Now – £300,000


Banksy (British, 1974)
Girl with Balloon, 2003
Spray-paint and stencil on canvas, edition of 25
40.5cm x 40.5cm

2015 – £175,000

Now – £600,000

To speak to us about an art valuation call us on 01883 722736 or email [email protected]

 

Are you correctly insured? The importance of having your contents correctly valued

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Sean McIlroy, Senior Valuer

How much do you insure my contents for?   This is a question asked to all clients by their broker or insurance company.  It’s also the hardest question for clients to answer.
Under-insurance is a huge problem in the industry.  A recent analysis of a sample of Walk Through Validation reports completed by Doerr Valuations, revealed high levels of underinsurance, particularly in the categories of fine art, jewellery and watches. 73% of the clients were under-insured by at least 36% and many, by as much as 50%. The answer to solving this problem is to undertake a Walk Through Validation (WTV) or a Full Valuation.
A WTV is an independent contents survey provided to appropriate clients which includes the general contents, fine art and jewellery assessment. Its aim is to ensure the correct levels of cover are in place and advise if a full valuation is needed.
The process for a WTV takes around two hours beginning with a discussion with the client about their current sums insured and how these figures were arrived at.  There is also a conversation about where and how items would be replaced in the case of a claim, whether it be at an Interior Designer, Harrods, John Lewis or Ikea.  No one assessment is the same, every client is different.   It’s very important to understand the clients buying habits to enable us to provide a value.  Every area of the contents is covered, including the replacement of your wardrobe contents, shoes and handbags, outdoor items and outbuildings.
The survey is a room by room, category by category break down of the contents where a senior valuer attends.  At the end of the WTV the figures are added together in their correct categories and totalled.  The senior valuer then discusses the findings and agrees them with the client.
In many cases high net worth clients may have specialist collections.  This may be in Contemporary Art, Jewellery, Watches, Silver, Porcelain or even Handbags.  If this is the case the survey would recommend a full valuation for a particular category by one of our relevant specialists.  This ensures that the sums covered are accurate.
The survey will include values and photographs of high value items and a photograph of the property and general room shots.  A section on security including confirmation of alarm systems, locks, safes etc, is also included.

The benefits of a WTV are many.

For the client, the contents sums insured are accurate and independently verified so they give piece of mind for the client and the broker can feel confident that they have done all that they can to make sure their clients are correctly insured.

For the underwriters, they will know the sums insured are correct and independently verified thus easing any claims process that may arise should the client suffer a loss.

For the cost of approximately £500 which may well be less than your Policy excess, it’s a win, win situation for clients, brokers and insurance companies alike.

When properly insured, should you suffer a loss you can be confident that the settlement you will receive from your insurer will replace the contents of your home for you and your family.