Claims Trends Summer 2021

What effect has Brexit and Covid-19 had on claims?

Our claims teams are often approached by different areas of our business wanting to know of interesting new developments and trends in our claims experience. We usually have to make excuses and apologise for not being able to highlight some dynamic new development. More often than not, our observations are slightly more mundane – that we have noticed an increase in accidental damage to hearing aids or increased claims for the removal of wasps’ nests. 

However there has been much recent focus on the Brexit and Covid effect causing a significant increase in construction costs and by implication, an increase in alternative accommodation claim costs.

Despite the success of the vaccination program in lifting Covid restrictions and delivering “Freedom Day”, the way ahead for contractors still remains uncertain and challenging for insurance repair work. A recent in depth review has shown a 5% increase in building repair costs in Q1. 2021 which is expected to increase throughout the year. There is reduced manufacturing capacity because of Covid working restrictions, shipping difficulties due to a shortage of shipping containers, insufficient numbers of HGV drivers having been pinged and increased demand for construction projects. Changes to the way construction materials are now imported due to Brexit has also led to delays. This is all putting pressure on contractors working in the insurance repair sector, some of whom use pre-agreed rates.

The cost of claims has been impacted because of a sharp increase in building costs caused by supply chain limitations, and an increased demand for building materials due to delays & restrictions on supply of materials. There is an upward pressure on costs due to reduced industrial capacity, importation delays, increased freight costs, Global and National building booms fuelling demand, Coronavirus-induced factory shut-downs, major US building/infrastructure demand, domestic Covid-fuelled home-improvement, HS-2 – hitting concrete supply in particular and competition between repair/maintenance and new-build (& consequent skills shortage) projects.

The material and labour supply difficulties is expected to continue for at least 12 months whilst manufacturers recover their capacity and the distribution problems are resolved.

We have recently seen progress delayed on some of our larger fire claims due to the lack of availability of roof tiles manufactured in France and stone kitchen worktops from Spain. So we are also affected by global issues which are beyond local control.

As shortages continue, circumstances may arise where it’s not possible to complete an insurance repair without changing the existing finishes or specifications. Repairs may have to be temporary just to enable re-occupation. A temporary kitchen might have to be installed, or an alternative roof covering used whilst awaiting delivery of the required materials.

The shortage of materials and skilled labour is having an obvious knock on effect to alternative accommodation costs. Additionally, the current high-demand for UK staycations as a result of Covid restricting travel overseas, has adversely affected the holiday let availability and supply of serviced apartments. It is more difficult to extend durations. Rates are typically up by 15%-20% and exceptionally 30%. Longer term rentals are performing better but there is limited availability and pressure on viewings. The stamp duty freeze and increasing prices in popular country holiday destinations has encouraged property sales, reducing the rental stock available to our customers.

Man fixing roof

 

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