The economic slowdown is starting to have a serious impact on the UK, with the Bank of England announcing at the start of August that inflation will hit more than 13% within 2022. This means that inflation has now accelerated past a 40 year high, having a knock on effect on the price of UK goods and services.
The insurance industry is feeling the pressure of the looming recession, with insurance claims inflation now steepening in 2022. The cost of insurance claims and premiums have climbed to around 10%, and there are a number of reasons for this rise.
Why insurance claims are increasing
There are a number of reasons why we’ve seen a claims inflation in property, motor and goods insurance:
Now that the UK is out of lockdown, and the UK is somewhat back to normal, there’s inevitably been an increase in road traffic claims. According to Confused.com, this claim increase has led to an increase in the price of car insurance.
As well as this, the motor industry faced supply issues during the pandemic which pushed up the prices of secondhand vehicles, repairs and labour. These supply issues caused goods and services, such as vehicles, vehicle repairs and vehicle hire costs, to become more expensive. With these price increases, motor insurance inflation has faced a knock-on effect.
Supply chains have also faced pressure within the construction market. The cost increase of building materials and labour have surpassed inflation rates, which inevitably has had impacts on policyholders.
The materials shortage, coupled with reduced labour capacity from the pandemic, has resulted in a significant increase in the cost of property insurance. On average, reconstruction costs have increased 8.1% nationwide since January 2020 and material costs have jumped an average of 5.2%, according to Bremer.
With material cost increases, the price of both domestic and commercial property has also increased – causing a spike in the price of insurance premiums.
How does insurance claims inflation impact the commercial industry?
For businesses operating with commercial property, the rising costs of materials and labour as explained above will add to the cost of both taking out insurance, and making a claim.
Other commodities such as certain metals, oil, gas and agricultural goods have risen since the start of the war in Ukraine. For companies shipping goods that have faced a sharp increase in value, there is a risk of underinsurance. It’s important that policyholders check for exactly what costs they’re covered for, so that they’re not having to pay more than expected.
What is inflation protection?
Inflation protection can shield against the impacts of inflation on your insurance policy pay-out. Find out more about inflation protection in our inflation and insurance blog.
How can Hallsdale Commercial help?
An insurance broker, such as Hallsdale Commercial, works to find the best inflation protection for businesses.
With the price of insurance soaring, it’s more important than ever to find the right policy – at a sensible price to suit your business. We work with insurers to find the best deals for saving you money and granting you peace of mind if you ever need to claim.
For more information on how Hallsdale Commercial can help you throughout the claims process, discover more here.