Rebuilding costs continue to rise – is your sum insured sufficient?

Crawford & Company has released a new report highlighting the challenges facing the construction industry, which are driving claims inflation. Key points from the report include:

• Rising Material Costs: Prices for ceramic, concrete, barrier and miscellaneous materials, finishes, metal, and roofing have increased by 20%-30% over the past three years. Concrete, in particular, is now 1.3 times more expensive than in late 2021, making it the most inflationary material during this period.
• Labour Shortages: The ongoing shortage of skilled tradespeople in Australia is contributing to higher claims costs and longer recovery times.
• Contractor Insolvencies: Increasing insolvencies among contractors are adding to the complexity and risk in the claims environment.
• Natural Disasters: The frequency and severity of natural disasters, driven by climate volatility, are putting upward pressure on premiums and reinsurance costs.
• External Factors: Conflicts in key shipping routes, tariff policies, and trade wars are further exacerbating claims costs. Companies are considering "nearshoring" to reduce geopolitical exposure, but this increases infrastructure and production costs.

The report emphasizes the need for robust validation and risk management to navigate this complex and risk-sensitive landscape. It also highlights the importance of greater scrutiny in builder selection and cost validation to avoid inflated quotes and scope creep. In light of these recent challenges in the construction and insurance industries, it's crucial for policy holders to ensure their property insurance sums insured are adequate.