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23rd October 2011

Insurers need to reflect rebuilding costs as new homes size grows

The trend for new homes in the UK to be built to a diminishing floor area halted last year, compared
with those built since the turn of the twentieth century. Latest research from The Building Cost
Information Service (BCIS) shows that, in 2000, two and three bedroom semi-detached houses were built with 16% fewer square metres than their counterparts in 1900. Over the last year, however, the size of these dwellings has stopped shrinking. This is a trend that is replicated across the spectrum of detached, semi-detached and terraced houses.
The findings of the BCIS 2010 survey, using the previous five year cycle, also reveal fresh
trends in the floor plans of new homes being built in the UK. These houses are now more likely
to incorporate utility rooms and more en-suite bathrooms, as well as an increased use of bay
windows and integral garages. Additional rooms are also increasingly being built ‘in the roof’
– particularly in three storey buildings. Larger properties are incorporating higher specification kitchen finishes and under floor heating. The use of land is being maximised by the innovative construction of ‘coach houses’– or apartments built over garages, a carport or drive-through, providing access to additional parking.
Whatever the size of a dwelling, it is important for insurers to be in a position to accurately assess risk and competitively price policies. Although bedroom rated policies give a standard sum insured for all policyholders, an underlying or ‘Notional’ rebuilding cost is still needed when setting premiums. The BCIS Notional Rebuilding Cost Matrix contains 2.6 million
residential rebuilding cost values covering most houses, bungalows and flats and is the most
comprehensive dataset of its kind. BCIS data is independent, accurate and commercially
unbiased and has been the principle source of rebuilding cost information and house
rebuilding cost inflation statistics in the UK for over 40 years. The Matrix uses rebuilding cost
models already accepted as industry standard by surveyors and loss adjusters.
Andrew Thompson, International Development and Data Director at BCIS explains “We recognise that providing a comprehensive Matrix of residential rebuilding cost values enables insurers to competitively price policies and increase their buildings insurance
business, whilst protecting their loss ratios by accurately assessing risk."