While inflation’s pace has eased in Canada, it’s still expensive to put homeowners back into their properties after a fire, flood, wind or other event.
That’s because lingering supply chain and labour-shortage issues are extending restoration timelines. And that’s increasing costs insurers must bear to accommodate homeowners who can’t return to their properties.
“Repairs are taking longer, and the materials costs have gone up almost 30% in most instances,” said Kumar Siva, senior vice president for third party administration services and desktop solutions at Sedgwick. ‘[That’s] driving up the total indemnity costs for like-and-kind home from previous years.”
Insurers saw supply chain issues begin driving inflation early in the COVID-19 pandemic. And, despite signs rising global goods prices were easing in late 2022, most cost increases have remained in place for materials related to home construction.
Which means specialists handling reconstruction claims must make adjustments to reflect surging prices for construction components. Several adjusters said the most problematic of those include lumber, finishing materials, appliances and home furnishings.
Labour realities
Meanwhile, economists noted a shortage of skilled tradespeople makes it harder for construction companies and contractors to control labour costs. That’s led to even more delays for home reconstruction, which further adds to the cost of claims.
“Speaking to insurers, we do know that they had to amend their labour rates to support the current inflation, as shortage in labour [exists in] adjusting as well as…trades,” Kumar told CU. “[That] is creating more delay to get things repaired in a timely manner.”
And inflating prices for building materials and labour aren’t the only issues. Other factors — like updated building codes after homes are built, maturing of landscaping and increased neighbourhood density that makes it hard to bring in heavy equipment — are in play.
In many cases, one brokerage owner told CU, these regulatory or physical site changes can raise rebuilding costs beyond what policies cover.
Alongside costs to repair or replace the buildings on a site with the same features prior to a loss, “the underwriter assessment would have to include costs to adapt to new building codes,” he said.
Feature image by iStock.com/Kosamtu
