The Impact of Escalating Construction Costs on Insurance Claims in Australia

According to a recent report by Crawford & Company, various materials have seen substantial price increases over the past three years. Concrete, for instance, is now 1.3 times more expensive than it was in late 2021, making it the most inflationary material during this period. Other materials, including ceramics, finishes, and roofing, have also recorded cumulative increases of 20% to 30%.

Labour shortages further exacerbate the situation, with the construction sector reporting a national gap of 90,000 skilled tradespeople. This shortage is leading to project delays, higher costs, and increased claims inflation. Wage growth is expected to reach 6% in 2025, and projections indicate that more than half a million new workers will be needed over the next five years to support national infrastructure and housing targets.

These escalating costs and labour challenges are reshaping Australia's claims environment. For insurers, claimants, and stakeholders across the built environment, this means navigating a more complex and risk-sensitive landscape. The cost of claims is rising, timelines are stretching, and the need for robust validation and risk management has never been greater.

In response, construction businesses are encouraged to adopt proactive risk management strategies. This includes thorough vetting of contractors, validation of project costs, and exploring alternative procurement strategies to mitigate supply chain risks. Staying informed about geopolitical developments and understanding the structure and geographic concentration of suppliers can also help businesses assess and identify vulnerabilities within their supply chain.

In conclusion, the rising construction costs in Australia are significantly impacting insurance claims and repair timelines. By implementing comprehensive risk management practices and staying abreast of market developments, construction businesses can better navigate these challenges and ensure the resilience of their operations.