Escalating Construction Costs Impact Insurance Claims and Repair Timelines

Over the past three years, prices for materials such as ceramic, concrete, barrier and miscellaneous materials, finishes, metal, and roofing have surged by 20% to 30%. Notably, concrete costs have increased by 30% since late 2021, making it the most inflationary material during this period.

The report highlights that the cumulative effect of these rising input costs is reshaping Australia's claims environment. Insurers, claimants, and stakeholders across the built environment are now navigating a more complex and risk-sensitive landscape. The cost of claims is rising, repair timelines are extending, and the need for robust validation and risk management has never been greater.

Labour shortages continue to be a significant challenge, with the long-running skilled tradie shortage driving up claims costs and delaying recovery times. Additionally, the increase in builder insolvencies reflects the fragility of the construction sector, with direct consequences for the insurance industry.

Natural disasters further exacerbate claims inflation. As climate volatility intensifies, the frequency and severity of insured events continue to rise, placing sustained upward pressure on premiums and reinsurance costs.

External factors, including conflicts in key shipping routes and tariff policies, also threaten to add to the pressure on claims costs. Trade wars are forcing companies to consider 'nearshoring,' which reduces geopolitical exposure but increases infrastructure and production costs.

In this challenging environment, greater scrutiny in builder selection and cost validation is essential to avoid inflated quotes and scope creep. Proactive risk management and robust repair validation frameworks are crucial for insurers and construction professionals to navigate the evolving landscape effectively.