With inflation and an impending recession hitting most of the UK hard this winter, the property claims industry has also been feeling the pinch. Indeed, the sector finds itself in something of a perfect storm, with various ongoing factors likely to have a direct and meaningful impact throughout 2023 and beyond.

Factors in play

As mentioned in my recent interview, the immediate skills shortage is affecting a number of key areas, as there is a continued reliance on traditional working methods, particularly around specialist trades. Without a consistent throughput of new labour, these areas impact both the cost of claims and the ability to fulfil a claimant’s requirements.

Further afield, the war in Ukraine has affected commodity prices as the conflict continues to impede the flow of goods internationally. This has caused a significant rise in costs and product shortages, all of which affect property claims and fulfilment. The related increase in transportation costs due to rising energy and fuel prices has also seen a hike in the overall cost of a claim.

Also, perhaps surprisingly, the Suez Canal blockage of 2021 continues to cause problems, with around 12% of certain materials commonly used for property fulfilment passing through the canal on any given day. The supply issues, both during the blockage period and post-incident, continue to impact material costs over a year later.

The country is also still recovering from the pandemic, and this has created a myriad of challenges, not least how businesses operate and the associated increase in costs from new ways of working.

Coming full circle with this perfect storm, we must also consider climate change and associated surge impacts. One of the driest and warmest summers since records began has caused a hike in claims costs through both increased subsidence and flooding once the rains arrive and can’t permeate hardened ground. This summer immediately followed a period of severe storms in the earlier part of the year, placing huge pressures on the property industry. This is now exacerbated by a quick thaw to December’s cold snap which will inevitably lead to escape of water and flood claims as pipes burst.

This doesn’t just create pressure via weather-related claims, but also due to the ever-increasing feast or famine effect of claims volumes which generates further pressures and overhead cost burdens. Additionally, this type of challenge has exacerbated labour shortages, with professionals leaving the industry in search of more consistent work.

Behavioural change

So, a fairly grim picture. With economic pressures within the UK compounded by ongoing global events, we have a less of a storm, more a hurricane on our hands.

If there’s one truism of inflation, it’s that the financial impact tends to flow downstream, and the various tributaries of the property supply chain have all been impacted. This includes a hit to the pocket of the risk carrier and any companies handling claims, with the trickle-down effect inevitably resting with the end user.

Interestingly, customer behaviours fluctuate during periods of uncertainty, with needs and preferences subject to rapid change. The pandemic resulted in longer than usual lead times for labour and, as a result, the industry saw an increase in customer requests for support to undertake property repairs rather than accessing the open market themselves.

However, since the pandemic there has been something of a U-turn.  As the cost-of-living crisis continues to bite, we are seeing customers increasingly favour a cash settlement over fulfilment support, with money in the pocket being a far more attractive option when under financial pressure.

Inevitably this is accompanied by an impatience for such claims to be resolved. So, in essence we could say that inflation has created a natural dip in customer satisfaction. We should also be very mindful that during tougher economic times, certain individuals and even groups are more likely to be tempted by claims exaggeration and fraudulent activity. Again, there is always an associated cost to this.

Satisfying claimant needs in tough times

With so many external factors around cost, a one size fits all approach to dealing with property claims suddenly becomes outdated. This means flexibility and increased efficiency become ever more important for the claims handling process.

Whilst it can be hard to communicate the reasoning for longer wait times to an exasperated customer, there are ways the industry can help mitigate this frustration through the claims handling process. In particular, automation technologies can enhance the customer journey, drive efficiency, and enable better claims outcomes, whilst easing personnel resource pressures that many businesses face as we move into 2023.

There also needs to be a better use of collected data to help inform the tailoring of processes which produce financial outputs more able to stand up to outside world pressures. This needs to be done at a more granular level than ever before and more closely aligned to policy wording, customer behaviours, perils, geography and even the time of year. Furthermore, monitoring the availability of materials and labour at any given time in any given place, and being able to adapt process based on the outcome or analysis of this data, is imperative.

Throughout the lifecycle of a claim there is now an even greater requirement to provide customers with information which manages their expectations and satisfies known upcoming queries. This can proactively help alleviate resource and manual pressures, whilst reducing frictional discontent caused by customers reactively trying to pull information from a business. Being efficient and offering omnichannel communication links to manage expectations against the backdrop of rising costs, can positively influence the associated expenditure of simply not doing so.

Adversity can often lead to process improvements as organisations seek to streamline and increase efficiency under financial pressures. With 2023 looking like another year of challenge for the sector, handling property claims is unlikely to get any easier. However, if insurers and claims handlers collaborate well and keep the customer at the heart of the claims process, we can weather the storm together.

If you’d like to find out how our team can support your business with property claims, get in touch with Andy Dakin, Director – Strategic Accounts via andrew.dakin@davies-group.com.