A Central Bank review has found many consumers do not have sufficient home insurance in place.
The study found that under insurance in the home insurance market has risen from 6.5% five years ago to 16.5% last year.
It also concluded that among those who have had their claim reduced due to under-insurance, the average reduction in the claim payment was approximately 19% last year.
This means, the Central Bank said, that those customers would have incurred substantial costs to fully meet the cost of their claim.
The regulator found not all insurers were sufficiently highlighting key risks to consumers.
It has written to insurance companies to highlight their concerns.
Specifically, it has told the firms they must communicate the risk of under-insurance to customers in a clear and understandable way.
They must also better manage the increased consumer risk.
"This review highlights the actions we expect of firms to ensure consumers are properly informed about the risk of under-insurance, and to provide them with relevant and clear information when taking out, or renewing, an insurance policy to ensure they are adequately protected," said Director of Consumer Protection, Colm Kincaid.
"This is especially important at this time of increasing costs, which heightens the risk that consumers could be left without adequate insurance cover."
The Central Bank has also urged consumers to check they have sufficient home insurance cover in place when renewing or switching their policy.
Brokers Ireland said the issue has worsened this year, since the review concluded.
"Costs have skyrocketed this year as a result of the Russian invasion of Ukraine which happened in February," said Cathie Shannon, Director of General Insurance.
"Some building industry sources say construction inflation has reached 20 per cent since last year."
"This can have a very significant impact in the event that you have to make a claim on your home insurance policy and anyone who has not reviewed their home insurance policy within the last year could be exposed in such an eventuality."
Jonathan Hehir, managing director at Insuremyhouse.ie said that at renewal time policyholders should use the opportunity to reassess not only the cost of their premium, but also the details of what they are covered for, including the rebuild cost of their home.
"However, many will openly admit that they haven't considered this in the recent past and so the sum insured has not changed, meaning that these people are underinsured and so hugely financially exposed in the event of a claim," he said.