The latest insights from Verisk, as they monitor materials costs, labour and supply chain delays in the property claims sector;
Insurers are dealing with a complex array of challenges, raising questions in the UK insurance market around increasing property premium prices. The last three years have seen unprecedented fluctuations in material costs for commercial and domestic property repairs, and this has been compounded by a scarcity of skilled workers driving up labour costs. Together with a number of severe weather events, claims costs have skyrocketed and while recent data indicates a plateauing and even a slight dip in the cost of some materials, there’s little indication of a return to pre-pandemic pricing.
The challenges facing property insurers have been highlighted by Verisk, a leading data analytics partner to the global insurance industry. In its latest UK property report, Verisk identifies factors such as the post-pandemic surge in energy and material demand, geopolitical tensions in Eastern Europe and the Middle East, and global supply chain disruptions as major contributors to a relentless climb in costs. During the period January 2021 – January 2024, the cost of materials rose by 19.5%, plant and equipment by 16.4% and labour by 11.3%.
In its report, Verisk points out that although there are some positive signs, 2024 has seen ongoing challenges for the industry. The year began with a series of impactful weather events across England and Wales, as Storms Henk, Isha, and Jocelyn brought heavy rain and strong winds, leading to significant flooding and property damage.
Ben Blain, Head of Property at Verisk, said:
“As material costs level off, claims costs are expected to follow suit, bringing much-needed stability to the sector. But, the cost of materials and labour remain high and the threat of severe weather events means the pressures on insurer balance sheets are likely to remain considerable for the foreseeable future. These shifting factors underscore the importance of understanding and addressing the factors contributing to rising claims costs in the property insurance sector.”
This report from Verisk highlights the multifaceted nature of these challenges, including the impact of ongoing geopolitical tensions in East Asia. The electro-technical sector, in particular, remains wary of potential disruptions to building materials, plants, and tools reliant on chips from the region, emphasising the interconnectedness of global supply chains and their implications for claims costs.
In the first quarter of 2024, UK construction material prices showed diverse trends. Plumbing products led with a 2% average price increase, while carpets, scaffolding parts, and wallpaper had more modest rises. However, there were also areas of relief. Architraves, skirtings, insulation, and roofing products experienced significant average price drops of 3-4%, offering some balance in the market. Regional variations in price fluctuations were also observed, with Northern Ireland experiencing the most significant increases.
In terms of labour costs, some trades witnessed substantial growth, with electricians and roofers enjoying significant wage gains. However, a minority of trades experienced decreases, emphasising the importance of monitoring wage trends alongside material costs.
Looking ahead, the stability in crude oil prices, thanks to OPEC+, provides further reassurance for insurers navigating the complex landscape of claims management.
Ben Blain remains cautiously optimistic for the sector. He said: “Verisk remains committed to providing insurers with actionable insights to navigate the evolving claims landscape effectively. There is room for optimism that 2024 will see a return to a more predictable and stable inflationary environment which insurers will welcome. But it will have to be fingers crossed that the weather is relatively benign during what remains of 2024.”
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