Commercial & Residential Property Premiums Face Rise as Costs Soar
In our end of year update, we spoke about keeping a close eye on inflation and the issues surrounding building material supply, shortages of labour and lorry drivers and inflationary pressure on the economy in the aftermath of COVID-19.
There are various agencies and trade bodies commenting on the situation and we have summarised the latest information for your ease in this review.
During 2021, we saw the impact on material costs, but there is now also noticeable increasing pressure on the cost of labour. Both material and labour costs are affected by the usual market forces – demand and availability and whilst demand for both new building works and repairs is still very high, resources are harder to source, and more expensive throughout the United Kingdom.
Inflation, which is measured by the Consumer Price Index (CPI), rose by 5.1% in the 12 months to November 2021 – its highest level in over a decade according to figures from the Office for National Statistics. The inflation figure showing a sharp upward trajectory in the latter part of 2021.
Further, the BCIS Materials Cost Index reveals the overall cost of materials in the index rose by 20.3% in the 12 months to November 2021 (see below). Construction material costs in the UK have also reached a 40-year high based on the annual growth of the index.
Keeping a Close Eye on Inflation & Client Responsibilities
As the market reacts to the soar of inflation, we urge our brokers to be mindful of the steep increase in inflation and the cost of materials and labour to ensure that all policyholders are adequately insured.
Whilst we take appropriate steps to help policyholders maintain an adequate sum insured by automatically index linking buildings and contents sums insured at renewal of our policies, it is important to point out that sums insured need to be adequate in the first instance.
Ian Russell, C.U.O said: “Ultimately, the cost of claims are continuing to increase for commercial and domestic properties. There are reports to state that there is a clear shortage of skilled labour, triggering wage rises, with some builders reporting an increase of up to 25% to attract the trades they need, coupled with shortages of labour such as lorry drivers and tradesmen. Brokers have a key role in assisting their clients to ensure their sums insured are maintained at adequate levels in this period of high building inflation”.
If you have any enquiries about the effect inflation is having on Folgate’s policies, you can contact the team at: