Your bank was acting as an insurance agent a couple of years ago and as such should be recommending realistic figures. Although rebuilding costs have come down a lot since the boom, yours sounds like it was overstated even for the time.
I'd certainly ask your bank's insurance department in writing to outline exactly why they recommended the particular figure to you a couple of years ago, i.e. how the sum insured was calculated.
Frankly I wouldn't be massively confident of a successful outcome for you as the bank may well be able to come up with a justification for the recommended level of cover, but it's no harm asking.