Claims inflation in commercial business

Claims inflation is a hot topic within the industry and particularly with our broking community.

Claims inflation is a hot topic within the industry and particularly with our broking community. Since the pandemic in 2020, several factors have influenced the cost of claims which has had a knock-on impact on insurance premiums. The cost of living has sharply risen with the impact of both Covid-19 and Brexit. Factors such as supply chain disruption, climate change, labour shortages etc. are all having an impact on the cost of insurance claims and the rise in premiums with claims inflation estimated to hit 10%.  

What are the key drivers of Claims Inflation in 2022?

In recent years, we have seen a number of global and national factors which have impacted the speedy access to materials, products, services and labour. Since the start of the pandemic these factors have accelerated and when combined have a significant impact:

Climate Change

  • More volatile and extreme weather patterns have resulted in severe storms and flooding in the UK, the July 2021 London Flash Flooding is a great example along with Storms Dudley and Eunice in Q1 2022.
  • Built-up cities, and building development on flood plains leave water being trapped in areas with insufficient drainage, resulting in significant damage from flooding
  • Insufficient historical investment in flood and river defences and drainage result in existing measures being overwhelmed, particularly in the current, volatile environment

Environmental Awareness

  • As we have become more environmentally aware, we have seen a shift to the usage of materials which are often lighter and more susceptible to significant fire and flood damage, increasing the costs and scale of repair
  • A number of technologies used and relied upon to protect buildings are also more expensive, and sometimes less technologically advanced, limiting the impact they can have on reducing damage

Large Losses and Reinsurance

  • Significant fire losses, often due to modern methods of construction or cladding have driven up the average costs faced by the industry
  • Internationally, we have seen devastating events including storms, wildfires and droughts, which have increased pressures on Reinsurers who have faced such losses. These have an upward impact on Insurer’s premiums


  • Challenges and queues at borders, limiting UK’s access to materials, goods and services, and creating delays at import stage
  • European labour has reduced in the UK, creating shortages of skilled labour in a number of industries, including construction and transportation i.e. lorry drivers
  • Tighter border controls, increased regulation around labour and imports and the relatively reduced appetite to trade with the UK have created reduced access, increased costs, and delays


  • UK has faced a number of pressures due to Covid-19, including lockdowns, reduced economic production, furlough, reduction in the money supply and reduced economic activity
  • Internationally, other countries suffered similarly, reducing economic output, manufacturing, and therefore availability of goods and materials
  • Consumption including shopping online from home and home repairs were artificially increased during these periods putting a strain on available resources

Supply Chain

  • Supply Chains were already starting to face increased delays and costs due to Brexit which were further exacerbated by Covid-19 resulting in challenges to international trade, increased cost of fuel, pressures to find more environmental methods for transport and demand for materials and labour
  • The situation in Ukraine, including economic sanctions on Russia puts inflationary pressures on energy for both UK and the rest of the world, pushing up the costs of production and transportation of machinery and materials in use in UK
  • Longer queues and lead times increase the time spent repairing claims and increase the cost of these too

Labour Markets

  • A number of industries have been impacted by a labour shortage with an increase in average age and retirement of skilled, experienced labour
  • The exit of foreign labour has had a further impact
  • Reduced supply of labour with increasing demand has put inflationary pressures on wages in a number of industries

All the above factors are having a significant impact on claims inflation over the last two years and it is no surprise that insurance premiums have increased as a result. We expect these costs to eventually normalise, however, customers can help to reduce the impact by:

We continually assess our pricing to ensure we are charging the correct amount for each risk presented, and assess each risk on individual circumstances. We continue to monitor claims inflation and work closely with our suppliers to ensure we are getting the best value for money when handling customer claims.