One of the big trends post-Covid19 has been the increase in costs for rebuilding properties of any type, domestic or commercial. Then there are the well documented supply chain issues on top, which can extend the job completion date by several weeks. All that has an impact on property and commercial insurance rates of course. In its latest property pricing trends report, Verisk’s analysis has identified a mixed bag of news for insurers in the fight to manage increasing property claims costs, which suggests the effect of inflation on rising premiums is not going away anytime soon.
Verisk has become a trusted authority in the insurance industry by supporting insurers at every step of the claim life cycle, and its property pricing report has been providing a comprehensive overview of the movements in material prices and labour costs since 2020. These trends carry significant implications for insurers as they assess and manage property-related claims and, subsequently, the impact on insurance premiums.
In a dynamic and ever-changing environment, Verisk’s analysis reveals shifts in the prices of materials commonly used in property repairs, including roofing products, wall tiles, and carpets. Additionally, the report also provides fluctuations in labour wages across various trades used in the repair of damaged property. This data offers valuable insights to the insurance sector and underscores the need for adaptive strategies in managing insurance claims effectively.
Price Movements in Materials:
The research indicates that prices for essential materials have shown mixed changes over the past quarter. Overall, the cost of materials fell by 1.4% which is a welcome easing of inflationary pressure on property insurers. While some materials experienced an increase in cost such as paint, wall tiles and carpets, the price of some materials went in the opposite direction, with the price of floor tiles, roofing, electrical and masonry products all falling.
Regional Variations:
The fluctuations in material prices were not uniform across the United Kingdom. In Wales, the Midlands, the Northeast and South West regions, prices fell in line with the national average. In the South West, London and Northern Ireland, prices remained broadly the same as Q2.
Labour Wage Movements:
The rate of inflation as well as the availability and demand for the skilled workers needed by insurers to repair damaged homes and businesses plays a significant part in wage fluctuations which in turn impacts the cost of claims as well as the time taken to repair damaged properties. Verisk research across advertised wages in the last quarter found that wages increased by 3.6%. Most in demand were jobs such as renderers and roofers. There was less demand for plasterers, bricklayers and scaffolders.
Ben Blain, Head of Property at Verisk said:
“As we reported in the last quarter, the worst inflationary pressures on the cost of materials used in property repairs would appear to be behind us. But, with the average price of diesel rising by 8% across the UK, and wages still rising for tradesman, it is a mixed inflationary picture for property insurers. This underlines the importance of continuous monitoring within the insurance industry to set and agree fair repair rates with contractors. In a dynamic landscape, insurers need to consider fluctuations in the cost of materials, running plant equipment, and labour so they have the flexibility to react and optimise their cost management capability as part of their ongoing duty to customers.”
As we enter the severe weather season, Ben Blain has the following message for insurers:
“Last winter was a challenging time for insurers and contractors. Our research showed that the rapid thaw led to a 560% increase in escape of water claims, resulting in a 35% increase in escape of water claim spend. As a result, work-in-progress repairs rose by 10% compared to the previous year, with contractor labour shortages adding to the delays. The Construction Leadership Council has said that the availability of most repair materials is back at pre-Covid levels which is helpful in getting on and finishing repair work. Unfortunately, the recent storms means the likelihood is that work-in-progress times will stretch even further which will present a customer expectation management issue for insurers and contractors.”
“If insurers and contractors want to up their game in the way both sectors respond to severe weather events going forward, and in ways they can control, agreeing a fair schedule of pricing with contractors is an excellent place to start.”
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