Ken O'Flynn (Cork North-Central, Independent Ireland Party)
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383. To ask the Minister for Finance if his Department has conducted or commissioned recent assessments of the prevalence of under-insurance among homeowners in the State, in view of recent increases in residential rebuild costs; the engagement he has had with the Central Bank of Ireland or the insurance industry to protect consumers from being inadequately covered; and if he will make a statement on the matter. [61153/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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As Minister for Finance, I have policy responsibility for the development of the legal framework governing financial services regulation, including for the insurance sector. The issue of under-insurance occurs when the sum insured on a property is less than the amount it would cost to rebuild or reinstate the property. According to the Central Bank of Ireland, this can leave a policyholder at risk of not being fully covered for losses were they to make a claim.

I am aware that the average cost of rebuilding a home has risen in the past year. This is due to multiple factors and can increase the risk of under-insurance. I would therefore encourage homeowners to check their home insurance policy to ensure that it covers the estimated rebuild cost of their home.

The Action Plan for Insurance Reform 2025-2029 includes various actions to increase awareness of key insurance issues, including with respect to underinsurance with the objective of informing the public, to have homeowners review their sums insured, to update their home insurance policy if necessary, and reduce the level of under-insurance.

The Department of Finance also engages with the Central Bank of Ireland (CBI) on a regular basis on such matters. The CBI is monitoring the level of under-insurance and in 2022, the CBI conducted a Thematic Review of the risk posed to consumers of not having sufficient home insurance cover. The Review was undertaken as a result of the increase in rebuild costs which can affect the level of insurance cover that a consumer should have on their property. The Review identified evidence of increasing levels of under-insurance from an average of 6.5% of paid claims being under-insured in 2017, up to 16.5% in 2021.

Upon completion of the Review, insurance firms were required, by the CBI, to communicate to their home insurance policyholders, either directly or by working with their intermediated partners, to explain the risk of under-insurance and the implications of being under-insured. Firms were required to explain to their policyholders the reasons why under-insurance is currently a heightened risk and how policyholders can better estimate their adequate sums insured value. Furthermore, the CBI noted that key information such as the application of the Average Clause, a common condition in a home insurance policy that can proportionately reduce the amount of a claim being paid, should be presented in a clear and understandable way to policyholders.

The CBI has advised the Department of Finance that by the end of Q1 2023, all firms in scope of the Review had issued communications to their policyholders that highlighted the risks of under-insurance and explained the importance of reviewing their home insurance details regularly to ensure they were adequately insured. In addition, all firms in scope had reviewed their consumer policy documentation and online information to ensure that key information was being provided in a clear and understandable way. Following this work, the CBI collected further data, on the levels of under-insurance, from the main insurance firms operating in the Irish home insurance market, in order to assess the impact of the actions that have been taken by firms. The data showed that reduced claims payments as a result of being under-insured have fallen from 16.5% in 2021 to 10.7% in 2024. This shows that the level of claims being reduced because of under-insurance has steadily reduced from its peak in 2021 and the CBI will continue to monitor this in 2026.

The Department of Finance will continue to work with the CBI, Insurance Ireland, and insurers to closely monitor developments in this area.