Cosmo:
1) I think Jef’s issue was overinsurance not underinsurance.
2) The “underinsurance clause” you describe applies only for a partial loss, not a total loss. For a total loss, Insurers will pay up to the Sum Insured. And why wouldn’t they, you paid the premium for that amount.
Jef:
Your best bet is to get the facts … a copy of the valuation letter and a copy of the insurance renewal … from the SM.
Certified Valuers know the Strata Act requirements (s.82 of the Act and s.12 of the Regulations) and usually state the values in that manner.
1) Building replacement, X.
2) Removal of debris, currently about 14% of X.
3) Professional fees, currently about 11% of X.
4) Subtotal, X * 1.25
5) 24-month uplift, currently about 10% of subtotal.
6) Total Valuation, X * 1.375.
For (5), the Regulations only require an 18-month uplift, but I think someone is assuming (probably rightfully) that the valuation will be obtained (on average) 6 months before renewal, or that your building will burn down (on average) 6 months into the period of cover.
It sounds to me like your OC wanted to cover both of those assumptions, in which case the Sum Insured of $9,660K would be (cautious or) reasonable.
The SM does not have the right to increase the amount above what the OC instructs them.
But remember that Insurers also include other benefits in their policies, like Catastrophe insurance (e.g. Canberra bushfires, labour and materials had to be brought in from interstate at increased cost).
Maybe someone is (wrongly) adding that to Sum Insured.