24th September 2021 by P. Merker

High rates of increase in producer prices can lead to high underinsurance in industrial property insurance. Here you can find out who is in particularly acute need of action. We explain what you need to look out for in your insurance contracts now and give you a 10-point roadmap.


Producer prices of industrial products were a whopping 12 per cent higher in August 2021 than in August last year. This means that German manufacturers raised their prices in August by the most in almost 47 years.

Producer prices of industrial products were a whopping 12 per cent higher in August 2021 than in August last year.

Development of producer prices of industrial products (domestic sales) in Germany compared with the same month of the previous year/previous month from August 2020 to August 2021 (Source: Statista)

For comparison: In December 1974, the price increase was 12.4 percent, due to the first oil crisis.

Producer prices are the prices ex factory – i.e. before they are further processed or go on sale. They are regarded as an early indicator of inflation, which at 3.9 per cent is already higher than at any time since 1993.

Besides energy costs, the main price drivers are intermediate products such as wood and steel, as the following examples show.

Energy + 24 %
Intermediate goods
+ 17 %
Softwood lumber+ 124 %
Secondary raw materials+ 104 %
Wood packaging material+ 89 %
Reinforcing steel in bars+ 87 %
Metals+35 %
Pig iron, steel and ferro-alloys+ 58 %
Non-ferrous metals and their semi-finished products+ 23 %
Basic chemical products + 20 %


When prices for commercial products rise, this can quickly lead to underinsurance in your business property insurance.

In property insurance, the replacement values of your machinery, plant and operating equipment are always insured (because in the event of a claim you usually also have to procure everything anew). In other words, the replacement prices for machinery and equipment are already directly affected by current price increases. The insured new values may already be higher than the established sum insured – underinsurance is imminent. (Here we provide detailed information on the risks of underinsurance.)


It is true that not all industries and machine types are equally affected by the current developments. Nevertheless, we recommend that all companies review their insurance sums. In any case, it is an essential part of ongoing risk management to review and adjust coverage annually. Ultimately, you as the policyholder are responsible for your insurance values (By the way: feel free to pass on the responsibility to us as experts).

We observe the market closely and our daily valuation practice shows that the following machinery and equipment are currently particularly affected (no claim to completeness!):

  • Inline machines
  • Printing machines
  • Harvesters
  • Compressors
  • Air conditioners
  • Heat exchangers
  • Plastics machinery
  • Chemical plants
  • Pipelines
  • Storage tanks
  • filling plants.

Accordingly, we see an acute need for action, especially for companies in the following sectors (again, we do not guarantee completeness):

  • Printing plants
  • Corrugated board manufacturers and processors
  • Plastics processing industry
  • Process engineering companies such as the petrochemical industry
  • Pharmaceuticals
  • Food industry
  • Power plant industry
  • Bottling plants
  • Dairies
  • Tank farms

Contact us if you are unsure (Tel. 0 40 602 13 33 or via our contact form)!


1. Check whether your insurance contract contains a provisional cover insurance or corresponding provisional positions.


Provisional insurance includes newly added risks in the insurance cover. This means that a gap in coverage is closed for a transitional period (for example until the next premium invoice). It is usually not a stand-alone insurance policy. But beware: Sometimes it is only valid if you inform the insurer about the increase in the inventory value! Until the next premium invoice, the increased risk is then usually co-insured free of charge.

2. Ask your insurance broker and/or your insurer whether the current price increases are covered by the provisional cover.

3. Clarify whether the provisional cover also covers increases in value or insufficient valuations (and not only changes in stock) and if so, whether the amount is sufficient.

4. Inform your insurance company about the coverage gap.

5. Have the provision adjusted if necessary.

6. Possibly have an under-insurance waiver agreed, which will help you – to a certain extent. Check your contracts!


Underinsurance waiver means that in the event of a claim – for example, in the event of a fire – the insurer waives its right to check the sum insured and compensates the claim up to a maximum of the agreed sum insured.

We give an example:

Your machinery has been valued at EUR 10 million replacement value. Therefore, your sum insured is also set at 10 million EUR. A major fire occurs – in which half of your machines are destroyed in terms of value.

In the meantime, the price increase has added 10 percent. The replacement values (i.e. the new values) are now EUR 11 million, the loss is therefore EUR 5.5 million.

Since the coverage ratio is only 91 per cent (10 million / 11 million), only 91 per cent of the damage, i.e. 5.005 million EUR, will be compensated.

If an underinsurance waiver has been agreed, the full damage of 5.5 million EUR will be reimbursed.

But beware! If there is a total loss in our example, only 10 million euros will be paid by the insurance company, because that is the agreed sum insured!

7. Consult with your broker and/or insurance company whether your underinsurance waiver (still) meets your individual risks in the current situation.

8. Check your contracts for additional value clauses.

Experience shows that a sum insured has a life span of 5 – 10 years with “good care”. In the current situation, it is important to apply the indices correctly if you determine your sum insured by means of valuation adjustment clause.


Adjustment clauses in industrial property insurance help to adjust the sums insured annually – and always for the new insurance period.

Usually, the sums insured are calculated on the basis of the respective new value of the machinery and equipment. Changes to the inventory, additions and disposals and, of course, price developments mean that the insured value fluctuates constantly. To ensure that price changes in the new values do not lead to underinsurance or overinsurance, the policyholder must constantly adjust his sum insured to the current development.

With value adjustment clauses, the adjustment of the sum insured can be calculated year by year without having to carry out an individual assessment each time.

And it works like this:

Based on the current new values, a basic sum is calculated for the items to be insured. The basic sum is based on prices from 1970, 1980, 2010 or 2015 (this is usually determined by the insurance companies).

The value supplement is calculated using index figures from the Federal Statistical Office. The sum insured is therefore the basic sum plus the value supplement.

If a value adjustment clause is agreed, the insurance company is liable for a maximum of the basic sum plus twice the value supplement in the event of a claim.

The prerequisite for this is that both the basic sum and the simple value supplement have been assessed by an expert.

The additional value clauses therefore also protect to a certain extent against inflationary price developments during the year.


In order to determine the value surcharges, the price tables of the Federal Statistical Office, Fachserie 17 Reihe 2, are usually used. For these values, about 6,300 companies are asked about the current prices of about 1,350 types of goods.

From these, the price increases of individual commercial goods – from low-fat curd cheese to articulated lorries – are determined.

However, these price data and their rates of increase always refer to the ready-to-deliver product ex works. This means that these indices do not include freight, packaging and assembly and their price increases. This can lead to considerable inaccuracies, because the assembly costs often develop in a significantly different way in terms of price than the pure manufacturing costs of a machine. The correct application of the specific designated price table 610 of the FSO for repair, maintenance and installation is complicated and is therefore mostly omitted.

There are separate price series for plants and equipment insured for electronics, as a distinction is made here between electronics and technology.

In addition, some insurance companies work with their own industry indices. Therefore, in order to determine the sum insured by means of value surcharges, the price indices must be applied correctly.

The more incorrectly the value supplements have been determined, the more volatile the price fluctuations are and the longer ago the last expert appraisal was, the sooner the sum insured for the next insurance year should be determined by a new appraisal.

9. Check when your sum insured was last determined by an expert.

10. Call us (tel. +49 40 602 13 33).

Philip Merker Expert for the appraisal of machinery and technical equipment

Philip Merker, MBA

Certified expert for the evaluation of machinery and technical equipment (DIN EN ISO / IEC 17024)

Colonnaden 46, 20354 Hamburg

Telephon +49 40 602 13 33
Email ­info@sv-merker.de