Are your customers’ sums insured keeping pace with risk?
In business, it’s understood that value is not a fixed concept. Over time, with changes in things such as material and stock prices, labour costs, energy and fuel prices, the insurable value of your customers’ business may inevitably change. So, your customers’ sums insured should generally continue to evolve proactively to align with those changes in value.
In reality, the value of an adequate sum insured often comes to light in response to a major loss event. When the insured’s financial outcome may be less than the cost of rebuilding property, replacing assets or mitigating lost income.
Have sums insured been changing?
To understand how sums insured may have changed, we analysed QBE 2024-5 buildings policy data (policies that were in force December 2024 vs those in force December 2025) and found:
- Fewer than 15% of customers increased sums insured beyond indexation (increased sum based on economic rises)
- 67.5% accepted the indexed sum insured
- 16.5% actually rolled back indexation to the previous sums insured.
A similar pattern emerges in building contents policies in force during the same timeframe, with only 9% increasing in sums insured beyond indexation, 68% accepting the indexed sum insured, and 18% rolling back the indexed figure.
For business interruption – where there is no indexing – our analysis of QBE 2024-25 policy data found more than 78% of policies remained at the sum insured from the previous year.
Key considerations for sums insured
Understanding purchase price vs. replacement costs
“A potential cause for a customer deciding not to increase their sum insured may be because, nothing in the business has changed,” said Nathan Taylor, Senior Product & Portfolio Lead – Commercial Packages at QBE.
However, the original purchase price of property or a business asset, such as machinery, may not be the same as the replacement cost at the time of a claim for loss or damage – something the customer may want to consider.
“What you pay for a property isn’t necessarily what it costs to rebuild, and you’ve got to separate those two concepts from each other,” said Taylor.
To illustrate, take an example involving a rural property that was purchased for around $350,000 and was damaged by a severe hailstorm ten years later.
When the damage was assessed, the estimated cost to rebuild the structure exceeded $1 million.
Rebuild costs can be difficult to estimate, as several factors influence them, including labour, materials and location. Taylor says for businesses in regional or remote areas, those costs can sometimes increase due to travel and logistics.
Construction materials also play a role. A building constructed from specialist stone or heritage materials, for example, may cost significantly more to repair than a standard brick structure.
Even infrastructure that sits outside the building itself, such as car parks, driveways and other site works, may be a consideration for the customer when calculating the building sum insured.
Machinery and other assets the business owns may also need to be considered at replacement value. A piece of machinery that cost $150,000 five years ago will likely cost more to replace today.
The impact of inflation
Inflation has also increased the pressure on replacement costs.
- Australia’s consumer price index rose by 3.7% in the 12 months to January 20261
- Month-on-month CPI has only decreased twice since November 20242
- In the 12 months to February 2026, the cost of furnishings, household equipment and services increased by 1.3%3
However, this is underlying inflation on the price changes relative to an ordinary basket of goods. The inflation that affects repair or replacement costs of specific items such as buildings or machinery may be subject to historical or future cost increases much greater than the underlying rate of inflation noted above.
In addition, damaging events (as in a hailstorm) may affect significant numbers of properties at the one time. This sudden peak in demand may create additional cost pressures through what we refer to as surge inflation.
Where a state of emergency is declared depending on your policy terms and conditions and the level of cover, the policy may provide additional benefits to help try and bridge this gap. Obviously, completely dependent on the policy terms. Generally, any benefit may only be beneficial if adequate insurance values are in place in the first place.
A possible unindexed exposure – Business Interruption
Unlike Buildings and Contents policies, Business Interruption (BI) policies may not be indexed, so be sure to check your policy terms and coverage.
“Business interruption sums insured are often tied to rent or turnover,” Taylor said. “But those things aren’t static.”
For property owners and landlords, this may be particularly relevant. Commercial leases commonly include CPI-linked rent increases, meaning income rises over time even if the BI sum insured remains unchanged.
“If rent has increased every year, but the BI sum insured hasn’t changed for five years, you might move into underinsurance territory,” Taylor explained.
BI cover can sometimes be less tangible for clients compared with buildings or equipment, however it may be an important conversation for brokers to have.
“It’s not always top of mind,” he said. “But it’s actually one of the easiest conversations to have – [if you want] you can simply ask the customer to consider what the business turned over last year or what their rent increased to.”
Managing the sums insured conversation at renewal time
For brokers, prompting customers to review their sums insured to ensure coverage remains appropriate to current exposures is at the heart of understanding their evolving needs – and renewal discussions present that opportunity.
Similarly for businesses, the information given to their broker may need to be updated and cover assets, revenue and operations.
“Renewal discussions are an opportunity for brokers to discuss sums insured with the customer so they can make a decision on what is right for their business, because underinsurance may affect claim outcomes if the sum insured doesn’t reflect the cost of replacing or rebuilding assets,” said Taylor.
“Brokers can ask questions about replacement costs, asset growth and changing revenue streams to help the customer assess whether sums insured are reflective of the business today.”
Another factor the customer may want to consider at renewal time is indexation. Indexation exists to help protect customers and keep cover aligned with rising costs, but according to QBE data one in every six buildings or contents policies are rolled back to the previous sums insured.4
“If the renewal goes out at a higher price, the customer’s going to say ‘everything’s going up!” said Taylor.
“Even though it may take more time, and be a challenging discussion, it can be valuable for brokers to discuss sums insured so the customer can decide whether they remain appropriate.”
Find out more
For more information, visit our Products page, or contact your QBE representative.
In search of more insights? Discover more from our team of experts over at Q Academy.
1 Consumer Price Index, Australia, Latest release | Australian Bureau of Statistics
2 Consumer Price Index, Australia, February 2026 | Australian Bureau of Statistics
3 Consumer Price Index, Australia, February 2026 | Australian Bureau of Statistics
4 QBE Business Packages and Business Interruption policy data – December 2024-25