LONDON, 11 March 2008 – Claims for the 2007 summer UK floods have revealed that estates, farms and country homes could be underinsured by up to 60% of their value. Following today’s gales and flood warnings, specialist insurance broker Aon is now urging owners to carry out valuations on their property and assets to ensure they have adequate cover in the event of the next flood or crisis.

While handling claims for victims of last year’s floods, Aon found that country and listed property owners are underestimating the value of their assets when arranging their insurance, potentially leaving a significant portion of their property and belongings without cover. This means that national treasures, family heirlooms or listed properties could be lost as owners will not be able to claim full compensation to restore or replace contents or buildings.

A listed building is rarely damaged beyond repair so the owner will also face pressure from the local authority to reinstate the building. If there is insufficient insurance to cover the full cost of reinstatement, the owner may be obliged to make up the difference or the local authority could make a compulsory acquisition of the property for its preservation.

Case study

A listed cottage in the Cotswolds was severely damaged in the floods and the owner presumed his index-linked sum insured of £87,000 would be sufficient to cover the rebuilding of the property and clearance costs. However, the loss adjuster’s report indicated a rebuilding cost of £200,000. 

The cottage was grossly underinsured at only 43% of its true value. The insurer had only received a premium based on the sum insured of £87,000 and therefore could have instigated an ‘average’ clause. This means they would settle 43% of the claim as only 43% of the property was insured. Had this been the case, the owner would have had to personally contribute over £160,000 towards the property reinstatement.

Fortunately, in this instance, the insurer paid the total sum insured of £87,000 but that still left the owner with the responsibility of meeting the remaining balance.

Jeremy Mitchell, senior account executive at Aon Private Clients, commented: “Many property owners do not realise how vital it is to have the correct levels of insurance cover in place. Having an up to date valuation from a surveyor is the only way to ensure that your property is adequately insured. It provides the correct re-build value in addition to a wealth of additional information about the property that a mortgage valuation survey would not have included. This could include disaster plans on rescuing assets from a flooded building and identifying watercourses, be it a local lake or an owner’s moat.

“The best route to finding a suitable surveyor is through a specialist broker or insurer. They will usually have a panel of recommended valuation firms who you can approach. In some cases you may find that they have negotiated special rates or that the insurer is willing to contribute towards the cost of the valuation.”

Ends

For more information contact:

Alexandra Lewis

0207 882 0541

Alexandra.lewis@aon.co.uk

About Aon

Aon Corporation (www.aon.com) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting.  There are 43,000 employees working in Aon’s 500 offices in more than 120 countries.  Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, our ability to successfully execute strategic options for our Combined Insurance subsidiary, the impact of current, pending and future regulatory and legislative actions that affect our ability to market and sell, and be reimbursed at current levels for, our Sterling subsidiary’s Medicare Advantage health plans, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of investigations brought by state attorneys general, state insurance regulators, federal prosecutors, and federal regulators, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, ERISA class actions, the impact of the analysis of practices relating to stock options, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates.  Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.

Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.