ONE in six homes are under-insured leaving homeowners financially exposed if they have to make a claim on their policy.
The Central Bank has now written to all insurance companies warning them of how exposed their customers are to having insufficient insurance cover in place.
It comes after surveyors said earlier this month rebuilding costs have increased by an around a fifth over the past year and a half because of construction inflation.
Research by the Central Bank has found that what it called under-insurance in the home insurance market has increased from 6.5pc in 2017 up to 16.5pc in 2021.
This means that around one in six homes have not got sufficient cover in place.
Regulators at the Central Bank found after a probe that not all insurers were sufficiently highlighting key risks to consumers.
The firms were told to take further action.
Firms must communicate with all home insurance customers setting out the consequences of being under-insured, the reasons why this is currently a heightened risk and how policyholders can better estimate an adequate sum insured value, the Central Bank said.
The review was undertaken because consumers are currently facing increasing rebuild costs, which affects the level of insurance cover that a consumer should have on their property.
This can leave consumers at risk of not being fully covered for their losses if they have to make a home insurance claim.
The review found that for those that have had their claim reduced due to under-insurance, the average reduction in the claim payment was approximately 19pc in 2021.
This means that that those customers would have incurred substantial costs to fully meet the cost of their claim.
Insurers have now been told to write to all home insurance policyholders explaining under-insurance.
They also have to set out the implications of being under-insured, the reasons why this is currently a heightened risk and how policyholders can better estimate the adequate sums insured value.
Central Bank director of consumer protection Colm Kincaid said: “We expect all firms to be proactive in identifying emerging risks to consumers and to support their customers in mitigating those risks.”
He encouraged consumers to check that they have adequate home insurance cover in place when renewing or switching their policy.
When reviewing home insurance cover, consumers should not focus on the premium alone but also on the level of buildings and contents cover that is currently in place to ensure it remains appropriate.
Earlier this month the Society of Chartered Surveyors Ireland (SCSI) said costs have shot up in the past 17 months by as much as €57,000 for a standard, three-bedroom, semi-detached house.
It is now more important than ever to examine the rebuilding part of home insurance cover, the society said.
National rebuilding costs have increased by an average of 21pc over the past year and a half because of construction inflation.
The SCSI has updated its annual House Rebuilding Guide, which is used by homeowners to calculate the costs for home insurance purposes.
In the latest edition, the increase in rebuilding costs ranges from 14pc in Dublin to 26pc in the north-west.