Continuing high levels of inflation in construction costs could see claims disputes in the event of a property loss
Continuing high levels of inflation in construction costs risks leaving homes and businesses underinsured in the event of fire or another catastrophic event, warns Chaucer.
Chance Gilliland, head of Global Property Delegated Authorities at Chaucer says that many businesses have tried to save money by not increasing the amount covered by their property even as constructions costs have soared.
In the event of a fire or other catastrophe, that could mean they have insufficient funds to rebuild or replace the damaged property. This could leave the insured tens or hundreds of thousands of pounds short of the actual rebuild costs of their property.
Falling short of rebuild costs
The UK Construction Material Price Index increased by 10.4% in the past year. This has been driven by increases in the price of insulating materials (41%), gravels and sands (20%) and concrete products (16%) in the past 12 months.
As rebuild costs are 10.4% higher than a year ago, an average property insurance policy set to cover £1m could now be short of covering the full rebuild value, meaning the policyholder is now underinsured.
A combination of sky high energy prices following the invasion of Ukraine and a 6% increase in worker wages in the past year, is pressuring construction companies to pass costs onto customers.
Chance Gilliland says: “Soaring construction costs driven by scarcity of raw materials, supply chain disruption and higher labour costs could leave UK businesses underinsured and at risk of excess costs.”
“It’s crucial that policyholders review their coverage to ensure that this is sufficient. Otherwise, they could find themselves in the position of having to pay for repairs out of pocket.”
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