What is the main consequence of an insurer offering a high standard sum insured under a household contents insurance policy?

The main consequence of an insurer offering a high standard sum insured under a household contents insurance policy is the potential for underinsurance. This situation arises when policyholders opt for a sum insured that does not accurately reflect the true value of their possessions. If the insured amount is set too low, this can result in inadequate coverage for the full extent of losses, especially in the event of a significant claim.

Setting a high standard sum insured can lead to policyholders being more cautious in selecting the proper insurance amount. When they understand the value of their belongings and match the sum insured accordingly, it ensures they are adequately protected. The focus on a high sum insured encourages policyholders to carefully assess their contents, minimizing the risk of underinsurance.

While increased claims processing, reduction in claims handling, and increased incidence of subrogation could occur under various circumstances, they are not direct consequences of offering a high standard sum insured. The correct emphasis lies in ensuring that the insured value corresponds to the actual value of the household contents to avoid underinsurance scenarios.