Towergate Insurance is warning that thousands of UK businesses could be exposed to significant financial loss due to underinsurance, driven as much by gaps in insurance knowledge as by inflation or rising rebuild costs.
The broker, part of the Ardonagh Advisory platform, surveyed UK businesses and found that 40% of respondents cited a lack of understanding of insurance as the most likely reason their organisation could be underinsured in 2024. This exceeded other key factors such as failing to review policies regularly (35%), increasing material costs (19%), and operational changes (7%).
Johnny Thomson, of RebuildCostASSESSMENT.com, also part of Ardonagh Advisory, said underinsurance is frequently linked to businesses using outdated valuations or assuming their insurance automatically adjusts to reflect changing costs.
“That’s simply not the case,” he said. “Without regular, informed reviews, many only realise they’re underinsured when a claim is made.”
Towergate is urging businesses to prioritise education around policy structures, commission up-to-date valuations, and conduct routine reviews to ensure cover reflects current risks and asset values.
“Underinsurance is often invisible until a major loss,” a spokesperson added. “Insurance needs to respond in practice – not just exist on paper.”
The warning comes amid broader concern across the UK insurance market over the scale of the underinsurance gap. Industry estimates suggest more than 40% of UK commercial properties are underinsured. Research from Charterfields in 2025 also showed that 88% of surveyed commercial sites were underinsured on building values, with 77% underinsured on plant and equipment.
Among small and medium-sized enterprises, the issue is particularly acute. It is estimated that as many as 80% of UK SMEs are underinsured and many would be unable to withstand the financial impact of a significant uninsured loss.
In some cases, properties are insured for just 63% to 68% of their actual rebuild value, which can trigger the “Condition of Average” clause, resulting in proportionately reduced claim payouts.
Contributing factors include outdated rebuild valuations, inflation in construction and labour costs, and policy limits that have not kept pace with business growth or operational change.
Towergate said insurance planning should be treated as a strategic priority. With the risk of underinsurance becoming more apparent during times of loss, the broker is urging business leaders to proactively address potential shortfalls before they result in financial disruption or closure.
