UK Insurance Law Episode 19: Average

This episode examines the concept of "average" in UK insurance law, a principle applied to claims in property insurance where underinsurance exists. Based on the Insurance Law Handbook, we explore how the average clause impacts claim settlements, requiring a proportionate reduction in payout if the insured property’s value exceeds the insured amount. We unpack the formula used to calculate average and discuss common types, such as "pro-rata average." Through case examples, this episode demonstrates how the average clause incentivises accurate valuation and the potential consequences for policyholders if underinsurance is discovered at the time of loss.