This article was first published in Insurance Post

With building material shortages expected to continue into 2022, loss adjusters and insurers have been urged to work together to support the supply chain.

The construction sector is being hit by a shortage of building materials, driving delays. COVID-19 has hurt suppliers. Extended lockdowns have increased pressure on transport networks, with less air freight capacity and shipping disruption. The UK’s exit from the European Union, Brexit, has also been flagged as a driver of delays, as well as global factors including environmental issues and disruption to the Suez Canal after the Ever Given ran aground last March.

Fixtures and fittings and steel have been in short supply over the past six months. Shortages saw prices for repair work materials up 26.2% year on year in October 2021, according to statistics from Department for Business, Energy and Industrial Strategy. The greatest price increase has been seen in fabricated structural steel (70.6% year-on-year change), imported sawn and planed wood (up 69.6%), and concrete reinforcing bars (an increase of 60.5%).

Russell Crewe, Chief Operating Officer of Property Claims at Davies, said that the shortage in the building materials continues to cause disruption to claim lifecycles and indemnity spend, both from a cost and procurement perspective. “Some of the major availability issues encountered last year have started to improve, but the industry continues to face disruption with shortages and delays on imported goods, and difficulty in procuring commonly used materials,” he told Post.

Specialist materials are also being affected by delays and price hikes, impacting the high net worth sector. Mark Pierce, Operations Director at Criterion, explained: “For example, marble used for high spec kitchens manufactured in Italy of Germany have been hit by supply chain delays. The impact of these delays has seen a significant increase to building tender values by up to 20% as the cost of material continues to soar.”

And while some areas had been predicted to stabilise by now, loss adjusters reported they were not necessarily seeing the fruits of this just yet. Lee Sadowski, UK Managing Director for Crawford Contractor Connection, said: “The view is that timber prices are meant to be stabilising but we’ve not seen that yet. There’s been a reduction in the increase but we’ve definitely not seen them flatline or reduce.” Further, he predicted that block and cement supplies will continue to face disruption into 2022.

Perfect storm

The construction sector is currently against the backdrop of a “perfect storm”, according to Sadowski. He said: “We had the post Brexit European trading conditions, COVID-19, the government’s commitment to continuing on new build and then the global demands on materials. Put them all together with the fact that in the last 18 months consumers and homeowners have been able to accumulate all time high from savings perspective […] has meant that people are wanting to do more work at home and companies seem to be willing to facilitate that.

“We’ve seen in particular timber, bricks and UPVC products have had huge price increases. In the last 12 months there has been 25% increase in materials associated with repairs and maintenance, which is a record increase. Typically materials equates to around about 30% of a typical job value.” He added that some materials such as roof tiles can have a 20 to 30 week lead time.

Sadowski continued: “If you’ve got a roof that’s severely damaged in a major loss situation, you might have had eight to 10 week lead time on tiles [previously], now suddenly that’s quadrupled.” In order to understand the cost to rebuild, underwriters are reviewing the sum insured, Sadowski noted.

He added: “Those who have large commercial portfolios are advocating that valuation surveys are completed to ensure they are adequately insured, given those kinds of rapid increases.”

Read the full article here.

For more information on claims solutions for your business, please contact Russell Crewe, Chief Operating Officer, Claims Solutions – UK & I via Russell.Crewe@davies-group.com