Construction Wholesale Prices Are Up 9.52%: Is Your Business Property Still Adequately Insured?

A property policy can be fully active.

Premium paid.

Policy period valid.

Yet one important exposure may remain hidden until a loss occurs:

the sum insured may no longer reflect the actual value of the property being protected.

That risk becomes more relevant when construction and material prices move quickly.

BPS-Statistics Indonesia reported that the Wholesale Price Index for buildings and construction increased 9.52% year on year in August 2026.[1]

The movement was associated with higher prices for materials including asphalt, reinforcing steel, cement, sand, and crushed stone.[1]

That 9.52% figure is not an automatic formula for increasing every building’s sum insured by the same amount.

It is, however, a strong signal that replacement values deserve review.

Market value and rebuilding cost are different

One of the most common sources of confusion in property insurance is the phrase “property value”.

A building has a market value.

That can reflect land, location, demand, access, and future development potential.

Insurance may require a different question:

What would it cost to repair, replace, or reinstate the insured property after a covered loss?

Those numbers are not necessarily the same.

Land generally does not need to be rebuilt after a fire.

Structures, installations, machinery, equipment, and certain improvements do.

Using market value alone can therefore produce the wrong insurance basis.

The sum insured matters

The Indonesian Standard Fire Insurance Policy states that the insurer’s liability for loss or damage does not exceed the Sum Insured.[2]

The wording also sets out options for repair, replacement, and reinstatement subject to policy conditions.[2]

The sum insured is therefore more than an administrative figure.

It forms part of the claim framework.

Underinsurance can affect partial losses

A more serious problem arises when the sum insured is below the actual value of the total insured property.

Article 12 of the standard wording addresses Under Insurance.

Where the total sum insured is lower than the actual value immediately before a covered loss, the insured may be treated as bearing the uninsured proportion of the risk, with the loss shared proportionally.[2]

This matters because underinsurance is not only a total-loss problem.

It may also affect partial claims, depending on the wording and applicable clauses.

A simple illustration

Assume a property has a relevant insurable value of Rp10 billion.

The policy carries a sum insured of Rp7 billion.

In simplified terms, only 70% of the value is insured.

If a Rp2 billion partial loss occurs and the underinsurance or average provision applies, the insured may bear a proportional share of that loss.

This is an illustration only.

Actual claims depend on policy wording, valuation basis, deductibles, endorsements, loss assessment, and claim facts.

Businesses should not calculate expected settlements using a generic formula without reviewing the actual policy.

Insurance values can quietly become outdated

There are many ways a gap develops.

Materials become more expensive.

Buildings are expanded.

Interiors are upgraded.

New machinery is installed.

Electrical capacity is increased.

Warehouses carry more stock.

But at renewal, the company simply repeats last year’s value.

After several years, the gap can become material.

The 9.52% index is a signal, not a valuation report

The construction WPI is a national aggregate indicator.

It is not a professional valuation of a specific asset.

A steel warehouse in Cikarang, a hotel in Bali, a commercial unit in Bogor, and a food factory all have different cost structures.

Their replacement values will not move exactly in line with 9.52%.

But when national construction-material prices rise materially, ignoring the insurance basis becomes harder to justify.

Property is more than the building

Underinsurance can also affect contents.

Factories have machinery.

Retail businesses have inventory.

Restaurants have kitchen installations.

Hotels have furniture, fixtures, and equipment.

Technology businesses may have servers and networking equipment.

If policy values are updated only for the building, other insured assets may fall behind.

Small improvements accumulate

Businesses often upgrade assets gradually.

A mezzanine this year.

A cold-storage unit next year.

A generator after that.

Electrical upgrades.

New equipment.

Each project may feel modest.

Together, they can substantially change asset value.

Who should determine the value?

Simple properties may be reviewed with support from an insurer or insurance adviser.

Large or complex assets may warrant professional independent valuation.

The objective is not to produce the highest number.

It is to produce a defensible value consistent with the policy basis.

Finance teams, property managers, risk engineers, surveyors, insurers, and brokers or agents may all have roles.

Internal asset records remain essential.

Do not wait for a claim to discover the problem

The worst moment to discover an inadequate sum insured is after a major loss.

Reviews should be proactive.

Useful triggers include renewal, major renovation, building expansion, significant machinery purchases, major stock changes, changes in occupancy, or sharp movements in construction costs.

A blanket escalation percentage is not always enough

Some businesses increase sums insured by a standard percentage each year.

That is better than never reviewing them.

But it does not solve a bad starting point.

If the original valuation was already low, adding 10% can leave the business underinsured.

If assets were sold or decommissioned, an automatic increase can also overstate the requirement.

A proper review needs to check the underlying asset schedule.

Underinsurance is a balance-sheet risk

For a CFO, this is not simply an insurance-administration issue.

It is a capital-protection issue.

If insurance proceeds are insufficient to fund recovery after a major event, the company must find the difference elsewhere.

Cash reserves.

Debt.

Equity.

Or delayed reinstatement.

That directly affects business continuity.

Five questions for the next renewal

Before renewing a property policy, ask:

1. When was the property last valued?

1. What valuation basis is being used?

1. Have renovations and additions been included?

1. Does the policy contain an underinsurance or average provision?

1. Is the sum insured still realistic relative to repair or reinstatement costs?

These questions are usually more important than simply asking how much the premium increased.

Having a policy is not the same as having enough protection

A 9.52% rise in construction wholesale prices does not mean every business should automatically raise its sum insured by 9.52%.[1]

But it provides a strong reason to review the basis of cover.

Underinsurance is often invisible when the policy is issued.

It becomes visible when a loss is measured against the insured value.

For business owners, risk managers, and CFOs, the better question is not:

“Is this building insured?”

It is:

“If a loss happened today, would the amount we insured still make sense against the real value of the assets at risk?”

That is the difference between having a policy and having adequate protection.