Unless your policy is on a first risk basis or it has been agreed with Insurers to waive the Average Clause, we believe it is important to draw up a valuation of the tangible assets so as to avoid underinsurance at the time of a claim which would mean that the Insured only has a partial recovery of the amount of their loss and damage.

This is even more relevant in a year such as this year of 2021, in which after the pandemic that had seriously affected the economic activity of businesses in 2020, we are seeing substantial hikes in the costs of both raw materials as well as sea freight, something that will undoubtedly impact the prices of the products manufactured by many companies. The strong increase in demand and a decrease in supply is what is shaping this situation, and accordingly it is not expected that prices will stabilise before 2023, whilst this is dependent upon there being a drop in the rate of transmission and a rise in the level of vaccinations worldwide.

Thus, it is foreseeable that there will be a mismatch between the New Replacement Value of the insured assets and their value in the policy, and consequently the same must be examined urgently by experts so as to update the sums insured for both the Material Damage and the Consequential Loss insurance policies, since the expected inflation will cause a rise in the fixed costs, profits and turnover of the companies in the post-pandemic situation.

Subsequently, the sums insured should be updated every year, but this will be relatively easy to do based upon an analysis of the investments and disinvestments made over the preceding year of account and the price fluctuations on the basis of the Industrial Price Index (IPRI) published by the Spanish National Statistics Institute (INE).

VANTEVO CLAIMS ADVISORS is at the service of Insureds and Brokers to undertake these valuations and guarantee an adequate sum insured for both the Material Damage and Consequential Loss policies, thereby avoiding the application of any underinsurance in the claims.