An expert discussion on fundamental building-insurance issues.

Among the critical takeaways from this guide are:

Comprehensive guidance is given to determine suitable Building Sum Insured (BSI) values for both low-rise and high-rise structures, and enhancements to the IVSC and NSW insurance calculation methodologies are suggested. This text focuses on discrepancies in the valuations of high-rise properties. This analysis examines the intricacies of property insurance, emphasizing the perils of inadequate coverage within the Australian market and provides globally pertinent insights.
Cretikos offers a comprehensive analysis of existing insurance policy deficiencies and suggests a superior BSI Value method. His analysis seeks to inform property owners about obtaining sufficient insurance to mitigate financial losses and avoid legal vulnerabilities. This indispensable resource demystifies the intricate process of determining the correct Building Sum Insured (BSI) Value for any situation.
Recommended Reading Globally applicable and tailored for homeowners, owners’ corporations, real estate professionals and property managers, insurance brokers and associated agents, building experts and developers alike, strata managers and lawyers, lawmakers and regulatory authorities, affordable and social housing authorities. Inside, you’ll discover takeaways including:
Understanding Underinsurance Homeowners and strata corporations often underestimate rebuilding costs, leading to financial shortfalls during claims. The book explains how inflation, increases in building costs after the event, regulatory compliance, and temporary accommodation costs can make standard Replacement Value insurance policies inadequate, especially for high-rise applications causing massive out-of-pocket costs.
Importance of an Accurate BSI Value Conventional Replacement Value formula rarely covers all costs after an insurance claim. The text designates Current Rental Values as the foundation for calculating the initial insured amount. These are valuable for high-rise valuations, as Architect Fees and Charges are calculated on full project costs, and the unequal Lot Entitlement formula becomes redundant because of the transparent and fair distribution of repair and maintenance expenses. Applicable to foreign geographies such as British Columbia, Canada, where using habitable areas is unsafe.
Flaws in Current Insurance and Legislation Current strata and general home insurance laws do not effectively protect against major monetary losses. The book advocates for legislative reforms to ensure policies cover destruction, catastrophe, total loss, and constructive total loss so that these scenarios provide for supplementary benefits in full, besides the BSI Value, as noted in the Valuation Schedule Offer or PDS wording.
Common Insurance Pitfalls Insurance providers often structure policies to limit or depreciate payouts, leaving homeowners and strata corporations responsible for large out-of-pocket costs. This may occur if you do not repair or rebuild or replace your property on another site. Policies may not explicitly include accommodation or any supplementary expenses, leading to financial hardship with disasters.
Innovative Insurance Valuation Methods The book introduces new insurance valuation tables that go beyond traditional methods. The valuation of high-rise properties causes a method distinct from the IVSC approach, given the extended reconstruction periods and amplified expenses not considered by the IVSC or other jurisdictions.
Case Studies & Practical Applications The book presents real-world examples of underinsurance, such as “Molly’s Loss Story,” where an inadequate policy led to financial disaster. The author explains how proper valuation calculations can prevent such issues.

Review by Bill Runciman

"Not a week goes by without a media report of life-changing, sometimes disastrous consequences arising from under-insurance of a residential building. The author, as treasurer of a strata committee, became involved in advocating for adequate insurance for both an anticipated realistic replacement value (allowing for inflation, delays, shortages, compliance requirements etc.) and for supplementary costs such as for accommodation and rental losses over a realistic time frame. He critiques many existing regulations, practices and valuation algorithms and proposes the use of a “Building Sum Insured Value” derived from expected rental values as an improved framework for calculating amounts to be covered. He advocates for legislation to harmonise the basis of building insurance policies, and for the standardisation of terminology and definitions for key underlying concepts. This would enhance much- needed transparency, improve consumer understanding of what they are paying for, and mitigate against many of the unanticipated adverse consequences of damage to or loss of residential buildings. “Caveat emptor. Let the buyer beware!” Must-read."

Reedsy Discovery Review Mardene Carr

"Must read 🏆 A worthwhile and necessary guide that demystifies selecting and maintaining appropriate building insurance coverage.

Synopsis

The aim of this endeavor is to enhance the readiness of property owners in case of a disaster, given that individuals seldom comprehend the complexities of insurance Replacement Value and the corresponding amount of compensation involved. Attainment of sufficient funds can be accomplished by selecting the Building Sum Insured (BSI) Value that encompasses the entire estimated catastrophe cost. Prevailing legislation is characterized by a significant disparity due to the absence of linkage or harmonization in the formulation requirements of Replacement Value with both strata and general home building insurance.
It is widely acknowledged that insurance providers limit their liability to spent costs due to legislative provisions that do not include provisions for additional benefits in cases of destruction, catastrophe, total loss, and constructive total loss—none of which are specified in legislation. There is a divergence in policies regarding the provision and implementation of supplementary benefits in strata insurance policies and a discrepancy with the protection framework regarding the safety net in home insurance policies.

Many people who pay for insurance year after year still have no clue about what they are paying for. Insurance companies have played hide-and-seek with property owners for years, and their unfairness can weigh heavily on the most optimistic among us. In Building Insurance: Your Guide, Michael Cretikos tries to bring some sanity to the complexities of building insurance. The author wants to help the reader learn the best method of selecting the correct building sum insured value for low-rise and high-rise structures.

Building Insurance: Your Guide is a practical and comprehensive resource for people who wish to understand building insurance better. While figuring out this dry and complex subject might not sit well with many, the author makes the topic engaging and easy to follow. You may need to sit comfortably and focus to stay on topic, but it is worth the read, if only for the education. Explaining the basics of building insurance and why it is different from other kinds of property insurance was the right thing to do before getting into the meat of the matter. Adding this foundation knowledge initially will certainly put most people at ease.

Michael Cretikos advises the reader on management and risk assessment by providing essential reading on evaluating risks associated with managing or owning a building. The author discusses human-related dangers and natural disaster risks. The end-of-chapter key points, scenarios, and case studies are a nice touch as Michael Cretikos skillfully guides the reader through the building insurance maze. The information might be hard to swallow, but readers can easily relate to the material.

Building Insurance: Your Guide is for you whether you are a property manager, landlord, business owner, or homeowner. While you may never have any reason to come face to face with the often unfairness of insurance companies, it never hurts to have the information just in case."

OnlineBookClub.org review of "Building Insurance Your Guide" by Bron Bakers

"Building Insurance: How to Select the Correct Building Sum Insured Value for Low-Rise and High-Rise Structures authored by Michael A. N. P. Cretikos is a comprehensive guide on how to select the best policy and factors to consider to avoid being in a situation of underinsurance. According to the author, he filled in the gap that exists in knowledge by introducing the Building Sum Insured Value (BSI) based on current rental value, and according to him, this method is the most accurate that there is.

The author highlighted situations in which underinsurance is inevitable and underlined ways to avoid such situations. Taxes such as stamp duties on insurance could be disincentives, and the author discouraged it. He advised the readers to always opt for 100% coverage so that the loss can be fully catered for and the insured reinstated back to their previous position. Several acts and policies were stated, and the authors made suggestions for innovations; the ICA code wasn’t left out; he highlighted the fault in it and gave feasible solutions.

This book was very informative, and I enjoyed reading it. The author's in-depth research shines through and adds a layer of authenticity to the book. I loved the fact that as much as the author criticized the already existing policies, he made suggestions for improvement. I equally appreciated the fact that there were so many quotations backed up with references so the readers can verify at their will. The step-by-step calculations and clearly outlined tables also enhanced my understanding of how numerical values are arrived at, and I absolutely loved it.

As much as I enjoyed reading this book, I found some parts overly repetitive, and I also found the consistent use of bold texts quite distracting. I loved the keypoints outlined in every section; it made the important information very easy to grasp. Overall, this book was an enlightening read and would keep readers eager to learn more.

I rate this book five out of five stars because of its informative contents and the fact that my dislikes weren’t enough to remove a star. I didn't find any errors while reading, which implies that the book was perfectly edited. I’d recommend this book to people who are interested in the workings of building insurance."

Kirkus Review

Cretikos presents a brief but thorough introduction to properly calculating an insurance value for one’s property.

"The author argues that there are fundamental flaws in the property insurance system, particularly in Australia, the principal country in his analysis. At the heart of the issue, he asserts, is Building Sum Insured Value (BSI), which is the monetary amount that the holder of an insurance policy receives in case of total loss. However, the formulas for calculating this amount are fatally flawed, Cretikos says, as they rely upon a calculation of replacement value—the value of the property immediately prior to the event that destroys it—and doesn’t factor in necessary supplementary costs, including temporary housing. Moreover, the standard formula neglects inflation over the policy period, and especially increased building costs. There’s currently “no legal definition of destruction, catastrophe, total loss, and constructive total loss,” nor a standardized interpretation of the competencies required to be a Building Insurance Valuation Specialist Valuer Practitioner. With impressive rigor, the author explains not only the technical challenges posed by the current understanding of BSI, but also preventative measures and techniques one can adopt to avoid being disastrously uninsured; for example, there’s a meticulous discussion of making a claim for the value of the contents of a property. Also, Cretikos carefully reviews inadequacies in the legal system that encourage too-low BSI valuations and suggests ameliorating legislation (although these discussions are mostly specific to New South Wales, Australia). He makes a strong case that the insurance industry is plagued by a “denial culture” in which companies aggressively attempt to avoid paying justified benefits, even if he does so in sometimes awkward prose: “Insurance providers employ deliberately crafted legal jargon to avoid making complete schedule-related payments that are rightfully owed, even if this results in the policyholder being compelled to bear out-of-pocket expenses that should be covered by Additional Benefits or other supplementary expenses.” Still, this brief instructional guide offers a wealth of practical knowledge.

An expert tour of some fundamental building-insurance issues."

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Michael A.N.P. Cretikos’ Biography

Michael’s birthplace is the Mozambique capital city of Maputo, historically known as Lourenco Marques. He began his education at St. Peter’s Preparatory School in Rivonia, Republic of South Africa, and later completed his studies at St. John’s College in Johannesburg. In 1971, he obtained a Bachelor of Architecture degree from the University of KwaZulu/Natal, Howard College Campus, Durban.

Following the completion of his mandatory military service as a Second Lieutenant in Mozambique, he relocated to South Africa and began his professional journey with the South African Railways. He successfully ascended to the role of Regional Architect in the Natal System.

Having emigrated to Australia in 1988, he was appointed as the Architectural Strategic Facilities Planning Officer at The University of New South Wales. He held the same position at The University of Sydney until retirement in July 2010.

Following years of active participation in his strata owners’ corporation, a significant underestimation of their compulsory building Insurance valuation motivated him to investigate the issue. After several years, he produced his final manuscript in 2024, Building Insurance: Your Guide.

According to Michael, he is the creator of the BSI Value, which is established upon current rental values as the primary component for Replacement Value.

Building Insurance Your Guide: Author Brand Story

I have always found myself deeply fascinated by intricate details, and my inner drive stems from the pursuit of distinguishing between right and wrong, as well as exploring the ambiguous territories that lie in between. What adds to the relevance of this work is my gained understanding of the operations of strata owners’ corporations and the corresponding legislation mandating building insurance for such corporations. This emphasises my role in uncovering, clarifying, and advocating for the rectification of issues pertaining to insurance and associated legislation. During my tenure as the treasurer of the strata committee, I was entrusted with overseeing the financial plan. During this timeframe, a particular strata manager secured a renewal insurance policy with a value approximately half that of its predecessor. This individual was resolute in their belief that our OC should adopt the new, more affordable insurance. Notwithstanding my firm objection, they persistently criticized me and engaged in communication with the other proprietors, who subsequently voiced their backing, asserting that I was the only dissenter. I remained steadfast in my decision and subsequently embarked on a journey of researching building insurance, which also entailed an extensive review of pertinent legislation. I hope my readers will join me in co-advocation for the changes for their rectification.