This is normal practice to increase the sums covered to take inflation into consideration.
AFAIK, It is a condition that the entire building cost be covered by insurance. If the cost of rebuilding was 200K last year, it is likely to be 210K this year, but if you are concerned that you are over-insured, it is possible to get an estimation of rebuilding costs from a surveyor and base your insurance on that. You might find that the building costs are higher than you think.