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Insurers face widening property valuation gaps as input costs surge
Construction input prices rose 4.8% year over year in Q1 2026, while a Kroll study found 90% of buildings reviewed were underinsured, often by 25% or more.
Rapid changes in energy, transportation, and building-material costs are making it harder for insurers to keep insured property values aligned with actual reconstruction expenses using annual inflation adjustments, Insurance Business reports. The outlet says volatility is increasing pressure for more frequent, property-specific valuations, especially for buildings tied to materials with sharp price swings within a policy year.
Insurance Business cites Associated General Contractors of America data, via BLS, showing construction input prices increased 4.8% year over year in the first quarter of 2026, the largest annual gain since January 2023. The same reporting points to a Kroll study of property appraisals that estimated 90% of buildings were underinsured, with 68% of those valued from 2020 to 2021 underinsured by 25% or more.
Verisk Claims Solutions pricing data strategy senior vice president Jason Taylor said carriers may need to move away from blanket annual inflation factors and revalue properties more often using current cost data. He added that frequent revaluation using up to date information such as additions or changes to structures could better reflect replacement costs than relying on an inflation multiplier.
Kristina Talkowski of Nationwide said underinsurance remains widespread, particularly after years when rising property insurance costs led some buyers to reduce limits or retain more risk. She noted that underinsurance can show up during the loss event because estimates used at placement may be a year old while the cost structure changes faster, and with property pricing now more stable, insureds may have an opening to reassess their coverage limits.