Claims inflation Claims inflation and how it and how it affects your affects your insurance. insurance.
The challenges just keep on coming for Australia’s building industry who’ve The challenges just keep on coming suffered the impacts of bushfires, for Australia’s the building industry who’ve earthquakes, pandemic, and eversuffered the impacts of bushfires, increasingly damaging floods. But the earthquakes, the has pandemic, and everbuilding industry not suffered in increasingly damaging floods. the isolation. These hardships haveBut caused building industry has not suffered in flow-on impacts to many industries, isolation. These hardships caused desperately trying to move have forward flow-on impacts to many after several taxing years. industries, Sadly, as a desperately trying to move forward result of these challenges, it’s often the after several taxing years. Sadly, as and a end consumer who’s left frustrated result of these challenges, it’s often counting the cost of a situation theythe end consumer who’s left frustrated and have no control over. It also leaves your counting the cost of a situation they insurance company trying to balance have no control over. also leaves these losses while stillItproviding a your insurance company trying to balance great service. these losses while still providing a great service. 4
EARLY EDITION > WINTER 2022
Business insurance
What’s the problem?
IfBusiness you haveinsurance business insurance, there’s a good chance you’re covered for Ifdamage you have insurance, to business the physical building,there’s the a good chance you’re covered for contents of the premises and even damage losses to the physical building, the financial stemming from your contents of the premises and even business being unable to operate for financial losses stemming from your various reasons. Right now, given business being unable to operate what’s happening in building and for various reasons. Right now, given construction, business insurance claims what’s happening in costly. building are becoming more In and the case construction, business of early learning centre insurance claims, theclaims are becoming costly.and In the case average cost ofmore a building contents of early learning centre claims, the claim has risen by up to 20% since the average cost of a building and contents start of the pandemic alone. We’re also claim has risen by up to 20% since finding claims are taking significantlythe start the pandemic We’re also longerofto finalise. Let’salone. deep dive. finding claims are taking significantly longer to finalise. Let’s deep dive.
Well, there’s quite a few, and some What’s the problem? of them are linked. The bushfires in Well, there’s quite few, and some late 2019 and earlya 2020 decimated of them are linked. The bushfires Australia’s domestic wood supplyinand latewe’ve 2019 been and early 2020 decimated so forced to look overseas Australia’s domestic wood supply to fill the gap. On top of bushfires, and so we’ve look overseas we’ve alsobeen had forced severaltocatastrophic to fill the gap.which On tophave of bushfires, flood events, increased we’ve also had several catastrophic demand for not only building materials, flood events, which have increased but construction workers to help demandSome for notbuilders only building materials, rebuild. have pivoted but construction workers to help from wood to steel, but the cost of rebuild. builders pivoted steel hasSome also risen duehave to high demand fromwon’t woodreduce to steel, butwood the cost of and until becomes steel has also risen due to high demand freely available again. and won’t reduce until wood becomes freely available again.
At the same time, we’ve also been dramatically affected by COVID-19 through lockdowns, quarantine and labour shortages. Problems arising from the pandemic have been felt across the globe with many countries experiencing similar difficulties. These factors have compounded supply chain issues, where labour shortages due to illness, means that there is no one to transport materials from overseas and no one’s available to transport them once they arrive in Australia. This has culminated in businesses being interrupted for far longer than they previously would have been. On top of all this, if there is a workforce available to transport and rebuild, they’ll be charging a premium to do so. Unfortunately, these costs all add up. According to Australia’s oldest quantity surveying firm and construction
cost consultancy, Rawlinsons, the cost of building a new kindergarten has increased 11% since 2019. Similar increases have also been seen in rebuild estimations provided by the Cordell’s calculator. Here at Guild Insurance, we’ve also seen a proportionate rise in claims costs over the last two years. What does the future hold? Unfortunately, we’re looking at another 12-24 months of uncertainty, particularly since new COVID-19 strains are a possibility, the La Niña weather system may be with us for a while longer and global political instability remains an issue. On the domestic front, experts warn that there won’t be much timber available for construction for the next 12 months and we should continue to expect the cost of materials and labour to further increase.
These events are impacting the insurance industry across the globe and as a result, the cost of insurance is going up across the board. How can Guild Insurance help? Your Guild Account Manager is here to make sure you have the right insurance for your business. We’re happy to discuss how these global issues might affect your cover and perform a review of your insurance requirements that reflects these circumstances. The rate of global claims inflation is challenging industry-wide, and we want to make sure you’re comfortable with the amount you’re insured for. Please call us to check that your cover is adequate to keep your business protected.
1800 810 213 guildinsurance.com.au
Don’t go it alone Guild Insurance Limited ABN 55 004 538 863, AFS Licence No. 233 791. This article contains information of a general nature only, and is not intended to constitute the provision of legal advice. Guild Insurance supports your Association through the payment of referral fees for certain products or services you take out with them. EAR230200 Early Learning - ACA QLD Inflation Claims Article 05/2022
