When Should Block Insurance Valuations Be Updated?

The RICS Recommendation: Every Three Years.

The Royal Institution of Chartered Surveyors (RICS) recommends that a full professional reinstatement cost assessment is carried out at least once every three years. In between, annual index-linked adjustments are acceptable as a bridging measure, but they are not a substitute for a professional assessment.

Many block managers assume that because their insurer applies annual indexation, they are covered. This is a dangerous misconception. Index linking adjusts the existing sum insured by a general construction cost index. It does not account for site-specific factors, changes to the building, or localised cost inflation.

Why Annual Index Linking Isn't Enough.

General construction indices like the BCIS All-in Tender Price Index track broad market movements. They cannot account for:

• Changes to the building since the last assessment (extensions, refurbishments, cladding replacement)
• Regional labour and material cost variations
• Specialist construction requirements (curtilage structures, listed features, complex M&E)
• The compounding effect of index-linking an already inaccurate base figure

If the original sum insured was wrong, and in our experience a significant proportion are, index linking simply perpetuates and compounds that error year on year.

Triggers for Earlier Reassessment.

Even within a three-year cycle, certain events should prompt an immediate reassessment:

• Major works or refurbishment to the block
• Change of use of any part of the building
• Significant market shifts (as seen post-2020 with labour and material inflation)
• Acquisition of the freehold or change of managing agent
• Any insurer query or challenge at renewal

The Consequences of an Outdated Valuation.

If a block is underinsured at the point of a claim, most policies apply what is known as the average clause, meaning the insurer will only pay out in proportion to the degree of underinsurance. On a £5 million block insured for £3.5 million, a £500,000 claim could result in a settlement of just £350,000. The leaseholders bear the shortfall.

For managing agents, allowing a known outdated valuation to persist can also create personal liability exposure under ARMA guidance and general professional duty of care obligations.